A CONCEPTUAL STUDY ON SHADOW BANKING STRUCTURE IN INDIAN CONTEXT

Shadow banking is that part of the financial system where ‘credit intermediation involving entities and activities remains outside the regular banking system’. Shadow banking trend was very strong in advanced countries, but they are not that much pronounced in developing countries like India. Risk taking and failure of shadow banking are the leading factors for financial crisis in many advanced countries. The economic growth of any economy depends on the sustainability of financial institutions. The financial institutions are broadly classified as banking and non-banking financial institutions. In India, the NBFCs (Non-Banking Financial Companies) are sometimes categorized as the shadow banking sector. The risk related to the excessive risk taking and failure probabilities of these institutions may create systemic crisis in India. Hence to avoid and also to prevent financial crisis a set of regulations to these shadow banking sector is needed.