It is in the nature of India’s political economy and policy architecture to act only once confronted with a crisis. A crisis has been brewing in the non-banking financial companies (NBFC) sector for a while, and the regulatory response seems to have been rather tepid so far. The long-drawn tragic story began with infrastructure lender IL&FS defaulting on its loans which, due to market linkages, also affected a larger number of banks, mutual funds and NBFCs. The Securities and Exchange Board of India has also soft-pedalled the issue of mutual funds lending investor money against share pledges in gross violation of fiduciary propriety, and their defaulting on redemption payments. The bigger danger is that neither regulator seems to have its sights on retail investors, small savers or on broader financial sector stability.

Source: Mint May 07, 2019 15:45 UTC