....A closer monitoring of banks is also required because “distress dependencies” between banks has risen. RBI’s analysis of the branch network of Indian banks reveals that the systemic importance “of the most connected” banks has increased. The risk that the failure of a large bank could ripple through all parts of the financial system has increased because of growing inter-dependence of banks, insurance companies and mutual funds. The random failure of a bank, which has large borrowings from the insurance and mutual funds segments of the financial system, may have significant implications for the entire system,” says the report......
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