Shadow Banking Crisis Raises Risk of Indian Bad-Loan Redux
- Yes Bank in focus as Moody’s puts credit rating under review
- Wider bank share price moves suggest the crisis isn’t systemic
A pedestrian and motorcyclist pass a Yes Bank Ltd. branch in Mumbai, India.
Photographer: Dhiraj Singh/BloombergThis article is for subscribers only.
Just as India’s banks emerge from under a pile of bad loans to large energy, steel and other industrial companies, they are facing a new reckoning from the accelerating crisis in the country’s shadow banking sector.
A year after a series of defaults by Infrastructure Leasing & Financial Services Ltd. forced the government to intervene and exposed weaknesses in the sector, the problems of India’s non-bank financial companies are entering a new phase. Other weaker lenders such as Dewan Housing Finance Corp. and Anil Ambani’s Reliance Capital Ltd. are struggling, putting the loans they received from a handful of the regulated banks at risk.