Shadow banking: Silent threat to India’s growth story

.....With non-bank companies accounting for almost 40% of India’s financial system, policy makers are struggling to tame inflation and reverse slowing growth, said Ashima Goyal, a Mumbai-based economics professor and member of the central bank’s technical advisory committee. While the Reserve Bank of India raised interest rates 13 times from mid-March 2010 through April of this year, inflation has remained above 8% for 21 of 26 months, according to data compiled by Bloomberg. Having so much money outside government control “stands in the way of smooth transmission of monetary policy,” Goyal said. “This challenge is at the root of India’s struggle to administer policy that will trigger the kind of growth the world is expecting out of India.”........

Read - DNA