What is shadow banking?

Edited excerpts of Deputy Governor of Reserve Bank of India R Gandhi's address at ICRIER's International Conference - Governance and Development: Views from G20 Countries

...........The type of entities which are called shadow banks elsewhere are known in India as the non-banking finance companies (NBFCs). Are they in fact shadow banks? No, because these institutions have been under the regulatory structure of the Reserve Bank of India, right from 1963 i.e. 50 full years before many in the world are thinking of doing so. In the wake of failure of several banks in the late 1950s and early 1960s in India, large number of ordinary depositors lost their money. This led to the formation of the Deposit Insurance Corporation by the Reserve Bank, to provide the necessary safety net for the bank depositors. The Reserve Bank did then note that .........

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