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Opinion
Andy Mukherjee

India’s Shadow Bank Tumult Casts a Widening Gloom

A wall of mistrust threatens to feed through to microlenders, hurting the poor and dragging down consumption.

After Modi's cash ban, this is the last thing small businesses need.

After Modi's cash ban, this is the last thing small businesses need.

Photographer: Dhiraj Singh/Bloomberg

It’s time India’s policy makers acknowledged the real problem facing the country’s shadow banks. What they are experiencing is no longer a vanilla liquidity shortage; the entire industry has crashed against a wall of mistrust.

On the other side of that wall are a clutch of wealthy property developers and their middle-class customers, as well as teeming multitudes of poor. Everyone is at risk.