India's economy faces a looming setback

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India's economy faces a looming setback

MUMBAI: There is a rising risk of contagion in India’s banking sector with many finance companies having lost more than half of their equity value in the past year, rating agency Standard & Poor’s said on Wednesday.

India’s non-banking finance companies, or more popularly “shadow banks”, went into a tailspin after the collapse of infrastructure lending behemoth Infrastructure Leasing and Financial Services (IL&FS) in September last year.

The financial companies in India are among the largest borrowers and a substantial part of their funding comes from banks.

The Reserve Bank of India has been closely monitoring the top 50 non-banking finance companies to ascertain if there is any rising systemic risk with more such institutions having failed over the last year, including housing finance major Dewan Housing Finance Ltd.