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What do you mean by shadow banking system? How does the crisis in the shadow banking industry affect the common man? Explain.

Topic:  Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

2. What do you mean by shadow banking system? How does the crisis in the shadow banking industry affect the common man? Explain. (250 words)

Reference:

Why this question:

The question is based on the concept of Shadow banking and its effect on the common man.

Key demand of the question:

Discuss in detail the concept of shadow banking; explain the concerns associated and its impact on common man.

Directive:

Explain – Clarify the topic by giving a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.

Structure of the answer:

Introduction:

Define what shadow banking is – The shadow banking system is a term for the collection of non-bank financial intermediaries that provide services similar to traditional commercial banks but have different regulatory guidelines.

Body:

  • Briefly explain what is shadow banking system and its role.
  • Enumerate the challenges faced by it in India.
  • Suggest ways to address these challenges.

Conclusion:

Conclude that the challenges of shadow banking system have to be addressed at multiple levels.