Good bank, bad bank

As the liquidity crunch continues unabated for India’s non-banking financial corporations (NBFCs), a plethora of steps have been suggested by market participants and policy experts. These include extending special credit lines, tighter regulation, imposing liquidity ratios and access to depositor funding. While all these measures have some merit, it is critical to triangulate the root cause of the crisis before applying any of the above remedies to avoid a situation where the cure turns out to be more deadly than the disease.   That NBFCs have been operating like shadow banks and .....

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