Shadow Banking

ILL&FS, an Indian shadow bank which closed late last year, may not have disclosed many of its bad loans to the government. A shadow bank is a unregulated institution that lends and conducts other financial activities without the consent of the government. A shadow bank is a danger to the government, for while it draws money from the public sector, it has free will to loan to whomever they want.

Last year, suspicions arose against the company as it had not reported any bad loans for four years. This triggered a full scale investigation by the government in its loan books, and the claiming of the company. However, many believe that a lot of the bad loans are still obscured from the government. Research shows that 70% of their total loans and assets were non-performing, or gone “stale”.

The government has elected a new board for ILL&FS, claiming that the previous one had been incompetent by failing to provide correct figures to the government till June 2018, when it was late for the payment of its debts.

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