Indus Leader

18/10/2025

💰 Modi Government’s “Sovereign” Mistake: A ₹1.7 Lakh Crore Shock!

A financial strategy once hailed as a “smart financial innovation” is now turning out to be an expensive blunder for the Indian government.

The government may face a loss of ₹1.5–₹1.7 lakh crore in repaying Sovereign Gold Bonds (SGBs) — and ultimately, the burden will fall on us, the taxpayers.

🔹 What Are Sovereign Gold Bonds (SGBs)?

Launched in 2015, this scheme allows people to invest in gold without actually buying physical gold.

Investors receive returns linked to the market price of gold, along with an annual interest of about 2.5%.

The objectives were:

To reduce physical demand for gold,

To save foreign exchange, and

To channel household savings into productive investments.

---

🔹 The Real Mistake

When the government issued these bonds, it did not actually back them with physical gold — meaning, the money collected from investors was never used to buy real gold.
It was all based on paper promises.

At the time, the assumption was that gold prices would remain stable.
But over the years, gold prices have surged to record highs.

Now, as the first batches of SGBs mature next month, the government must repay investors at these much higher gold rates — resulting in tens of thousands of crores in losses.

🔹 The Outcome

How can a government managing a trillion-dollar economy make such a massive risk miscalculation?

This isn’t just a financial error — it’s a policy blunder, a serious issue that demands introspection.

Sometimes, even a “golden idea” can turn out to be very costly. 💸

19/02/2022

Why is not responding on alleged links with Forces and ?
is standing by his comments.

30/07/2019

I've failed, sorry to let you down: Coffee Day founder's last letter Cafe Coffee Day Group founder V.G.Siddhartha allegedly committed su***de on Monday night. Siddhartha has been missing since Monday night. Here are his last words to the board of directors and shareholders."To our Board of directors and Coffee Day family, After 37 years, with strong commitment to hard work, having directly created 30,000 jobs in technology company where I have been a large shareholder since its founding. I have failed to create the right profitable business model despite my best efforts. I would like to say I have given it my all. I am very sorry to let down all the people that put their trust in me. I fought for a long time but today I have up as I could not take any more pressure from one of the private equity partners forcing me to buy back shares, a transaction. I had partially completed six months ago by borrowing a large sum of money from a friend. Tremendous pressure from other lenders lead to me succumbing to the situation. There was a lot of harassment from the previous DG income tax in the form of attaching our shares on two separate occassions to block our Mindtree deal and then taking position of our Coffee Day shares, although the revised returns have been filed by us. This was very unfair and has led to a serious liquidity crunch.I Sincerely request each of you to be strong and to continue running these businesses with a new management. I am solely responsible for all mistakes. Every financial transaction is my responsibility. My team, auditors and senior management and totally unaware of all my transactions. The law should hold me and only me accountable, as I have withheld this information from everybody including my family.My intention was never to cheat or mislead anybody. I have failed as an entrepreneur. This is my sincere submission. I hope someday you will understand, forgive and pardon me.I have enclosed a list of our assets and tentative value of each asset. As seen below our assets outweigh our liabilities and can help repay everybody.Regards,V.G. Siddhartha" 70444365 ~ Cafe Coffee Day Group founder V.G.Siddhartha allegedly committed su***de on Monday night. Siddhartha has been missing since Monday night. Here are his last words to the board of directors and shareholders."To our Board of directors and Coffee Day family, After 37 years, with strong commitment to hard work, having directly created 30,000 jobs in technology company where I have been a large shareholder since its founding. I have failed to create the right profitable business model despite my best efforts. I would like to say I have given it my all. I am very sorry to let down all the people that put their trust in me. I fought for a long time but today I have up as I could not take any more pressure from one of the private equity partners forcing me to buy back shares, a transaction. I had partially completed six months ago by borrowing a large sum of money from a friend. Tremendous pressure from other lenders lead to me succumbing to the situation. There was a lot of harassment from the previous DG income tax in the form of attaching our shares on two separate occassions to block our Mindtree deal and then taking position of our Coffee Day shares, although the revised returns have been filed by us. This was very unfair and has led to a serious liquidity crunch.I Sincerely request each of you to be strong and to continue running these businesses with a new management. I am solely responsible for all mistakes. Every financial transaction is my responsibility. My team, auditors and senior management and totally unaware of all my transactions. The law should hold me and only me accountable, as I have withheld this information from everybody including my family.My intention was never to cheat or mislead anybody. I have failed as an entrepreneur. This is my sincere submission. I hope someday you will understand, forgive and pardon me.I have enclosed a list of our assets and tentative value of each asset. As seen below our assets outweigh our liabilities and can help repay everybody.Regards,V.G. Siddhartha" 70444365

Cafe Coffee Day Group founder V.G.Siddhartha allegedly committed su***de on Monday night.

30/07/2019

Ratings paint a grim picture for the economy MUMBAI: The rate at which bank nonperforming assets (NPAs) are growing has slowed, indicating an improvement in the asset-quality situation, but debt downgrades have outstripped upgrades for the first time in at least three years. Some rating agency executives said however that this reflected the slump in the broader economy and didn’t mean that bad loans were set to spike.An analysis of credit rating agency actions by Prime Database in the six months since January shows that downgrades outpaced upgrades by two to one for the first time since 2016. Downgrades were at 167 against 73 upgrades. To be sure, in 2016 too, downgrades were higher than upgrades though the gap was much less at 71-58, Prime Database said.The Reserve Bank of India’s biannual Financial Stability Report (FSR) released late last month had showed that bank asset quality is on the mend and will continue to improve. The RBI pushed banks into embarking on asset-quality reviews in 2015 in order to uncover the true status of their loan books and the amount of rotten assets they held. This stood at around Rs 9.40 lakh crore at the end of March 2019, according to the latest data. 70442398 Bad Loans Expected to FallThe report estimated that Indian banks’ bad loans as a percentage of the total would fall to 9% by March 2020, down from 9.3% in March, led by public sector banks (PSBs). The NPAs of staterun banks were seen declining to 12% by March 2020 from 12.6% in March 2019, the report said.Rating company executives said that the increased number of aggregate downgrades during the first half of the year was a reflection of the downturn in the macroeconomic scenario. India’s economic growth slowed to a five-year low of 5.8% in the March quarter.“This only confirms what we said in the modified credit ratio (MCR) earlier this month,” said Sanjay Agarwal, senior director, Care Ratings. “We are broadly seeing stress in two segments—small and large companies. While the small companies are facing a slowdown in business which has increased now, the large companies are facing a tighter liquidity scenario. This issue may not be systemic but on an individual basis.”The executives don’t see anything contradictory in the RBI’s prediction of slower NPAs and higher downgrades. The latter don’t necessarily mean defaults, they said.“We had mentioned in our March 2020 outlook that liquidity will continue to be the main driver of credit profiles,” said Soumyajit Niyogi, associate director at IndiaRatings.“Since our outlook was released, the economic scenario has weakened further. Though systemic liquidity has improved, the situation for individual companies is not better. Together with the domestic economy, the global economy is also not in the best of shape. All these factors are manifesting in the numbers.”The downgrades call for a watch on the economy but may not automatically mean that NPAs will rise.“The downgrades are to do more with prime debt and is an indicator that the quality of debt has deteriorated. Yes, we have seen some large defaults but downgrades do not mean that NPAs will rise automatically,” said Agarwal of Care. ~ MUMBAI: The rate at which bank nonperforming assets (NPAs) are growing has slowed, indicating an improvement in the asset-quality situation, but debt downgrades have outstripped upgrades for the first time in at least three years. Some rating agency executives said however that this reflected the slump in the broader economy and didn’t mean that bad loans were set to spike.An analysis of credit rating agency actions by Prime Database in the six months since January shows that downgrades outpaced upgrades by two to one for the first time since 2016. Downgrades were at 167 against 73 upgrades. To be sure, in 2016 too, downgrades were higher than upgrades though the gap was much less at 71-58, Prime Database said.The Reserve Bank of India’s biannual Financial Stability Report (FSR) released late last month had showed that bank asset quality is on the mend and will continue to improve. The RBI pushed banks into embarking on asset-quality reviews in 2015 in order to uncover the true status of their loan books and the amount of rotten assets they held. This stood at around Rs 9.40 lakh crore at the end of March 2019, according to the latest data. 70442398 Bad Loans Expected to FallThe report estimated that Indian banks’ bad loans as a percentage of the total would fall to 9% by March 2020, down from 9.3% in March, led by public sector banks (PSBs). The NPAs of staterun banks were seen declining to 12% by March 2020 from 12.6% in March 2019, the report said.Rating company executives said that the increased number of aggregate downgrades during the first half of the year was a reflection of the downturn in the macroeconomic scenario. India’s economic growth slowed to a five-year low of 5.8% in the March quarter.“This only confirms what we said in the modified credit ratio (MCR) earlier this month,” said Sanjay Agarwal, senior director, Care Ratings. “We are broadly seeing stress in two segments—small and large companies. While the small companies are facing a slowdown in business which has increased now, the large companies are facing a tighter liquidity scenario. This issue may not be systemic but on an individual basis.”The executives don’t see anything contradictory in the RBI’s prediction of slower NPAs and higher downgrades. The latter don’t necessarily mean defaults, they said.“We had mentioned in our March 2020 outlook that liquidity will continue to be the main driver of credit profiles,” said Soumyajit Niyogi, associate director at IndiaRatings.“Since our outlook was released, the economic scenario has weakened further. Though systemic liquidity has improved, the situation for individual companies is not better. Together with the domestic economy, the global economy is also not in the best of shape. All these factors are manifesting in the numbers.”The downgrades call for a watch on the economy but may not automatically mean that NPAs will rise.“The downgrades are to do more with prime debt and is an indicator that the quality of debt has deteriorated. Yes, we have seen some large defaults but downgrades do not mean that NPAs will rise automatically,” said Agarwal of Care.

Rating cuts outpace upgrades by two to one during Jan-June, first time since 2016.

30/07/2019

Three ex-bankers win Netflix backing to shake up Bollywood By Saritha RaiA tiny digital studio is making a name for itself in the world’s most prolific movie industry, scoring funding from a marquee Silicon Valley investor right after nailing a deal to stream its most popular show on Netflix.Pocket Aces Pvt has raised $14.7 million from Sequoia Capital, DSP Group, 3one4 Capital and others to bankroll content aimed at pushing Indian shows beyond hackneyed Bollywood formulas -- like “saas-bahu” or mother-in-law versus daughter-in-law dramas. It’s one of a band of startups moving away from familiar staples to try and hook an exploding population of mobile viewers. Pocket Aces plans to use the funds to get into gaming content, make strategic acquisitions and boost production to 30 shows a year from the current dozen.India has become a battleground for global streaming giants from Netflix Inc. to Amazon.com Inc. and Walt Disney Co.-owned Hotstar. They’re drawn by a market that could hit 829 million smartphone users by 2022, compared with about half a billion now, according to Cisco Systems Inc. estimates, many of them first-time Internet users consuming entertainment via their mobiles.Last week, Netflix raised the stakes, announcing one of the world’s cheapest streaming subscriptions: an under-$3 monthly mobile-only plan for India. On Monday, two of its leading homegrown streaming rivals -- ALTBalaji and ZEE5 -- announced they were joining hands to create more than 60 original shows, share audience insights and grow subscriptions.The Mumbai-based, 145-person Pocket Aces uses artificial intelligence and machine learning to test genres, actors and plot lines in pilots before spinning them into longer shows for streaming platforms, social media channels and its own apps. "Our shows garner 500 million views per month and we aim to hit 1 billion monthly views by 2020," said co-founder Aditi Shrivastava.The business was conceived out of dorm-room conversations between co-founders Anirudh Pandita, 34, and Ashwin Suresh, 35. From engineering undergraduates at the University of Illinois Urbana-Champaign, the pair went on to work on Wall Street before starting their company in 2014. They were joined later by Goldman Sachs Group Inc. alum Shrivastava, now married to Suresh. Pocket Aces’ first show was launched in 2015.Unlike studios tied to traditional distribution channels, Pocket Aces focuses on mobile consumers and syndicates content to a variety of companies, from Emirates Airline to ride-hailing service Ola and Alibaba Group Holding Ltd.’s video-streaming service Youku Tudou. It has several originals lined up for Amazon and Hotstar in India and recently signed a global deal to create several shows for Netflix. It’s negotiating with multiple Hollywood production companies to create content. The firm’s average employee age is 23.“Most studios still suffer from the HIPPO effect,” said Suresh, invoking the acronym for highest-paid person’s opinion or a tendency to defer to the most senior decision-maker. “Ours is decentralized and very data-driven.”Pranav Pai, managing partner at venture backer 3one4 Capital, calls the startup’s approach a “data-driven, continuous feedback loop” that helps improve stories and production.That has allowed Pocket Aces to steer clear of the clubby Bollywood scene populated by the offspring and relatives of established actors, producers and directors. Pocket Aces crunches data to gauge the popularity of actors, who then get cast in bigger shows. “We don’t have people sitting in a room taking decisions,” Pandita added.Pocket Aces’ content tends to avoid the hero-always-wins happy-endings favored by big-budget Bollywood films, or the slower-moving plots of Indian television’s family dramas. “Young people have moved on,” Suresh said.The startup’s most successful show is Little Things, which follows an unmarried couple as they navigate emotional upheavals, career trauma and personal aspirations in fast-paced Mumbai. It started off as a short video but went on to become a multi-episode series and is now streamed worldwide on Netflix to audiences from Turkey to Latin America.Ananya Ivaturi, an undergraduate student at the University of British Columbia in Vancouver, is an ardent fan. "It’s a modern take on a cute relationship," said Ivaturi, 19. "Most of the family dramas on TV are exaggerated and irrelevant to the younger audience. They have regressive portrayals of women."Pocket Aces subtly delves into subjects such as homosexuality, cohabiting outside of marriage and divorce. In a show called What the Folks, the protagonists -- a young couple -- debate onscreen whether or not to have children, unheard-of in most Indian families. In Adulting, about two young women traversing relationship and financial crises, the characters discuss what lines can be crossed in an office romance.“There is a great hunger for good content,” Pandita said. ~ By Saritha RaiA tiny digital studio is making a name for itself in the world’s most prolific movie industry, scoring funding from a marquee Silicon Valley investor right after nailing a deal to stream its most popular show on Netflix.Pocket Aces Pvt has raised $14.7 million from Sequoia Capital, DSP Group, 3one4 Capital and others to bankroll content aimed at pushing Indian shows beyond hackneyed Bollywood formulas -- like “saas-bahu” or mother-in-law versus daughter-in-law dramas. It’s one of a band of startups moving away from familiar staples to try and hook an exploding population of mobile viewers. Pocket Aces plans to use the funds to get into gaming content, make strategic acquisitions and boost production to 30 shows a year from the current dozen.India has become a battleground for global streaming giants from Netflix Inc. to Amazon.com Inc. and Walt Disney Co.-owned Hotstar. They’re drawn by a market that could hit 829 million smartphone users by 2022, compared with about half a billion now, according to Cisco Systems Inc. estimates, many of them first-time Internet users consuming entertainment via their mobiles.Last week, Netflix raised the stakes, announcing one of the world’s cheapest streaming subscriptions: an under-$3 monthly mobile-only plan for India. On Monday, two of its leading homegrown streaming rivals -- ALTBalaji and ZEE5 -- announced they were joining hands to create more than 60 original shows, share audience insights and grow subscriptions.The Mumbai-based, 145-person Pocket Aces uses artificial intelligence and machine learning to test genres, actors and plot lines in pilots before spinning them into longer shows for streaming platforms, social media channels and its own apps. "Our shows garner 500 million views per month and we aim to hit 1 billion monthly views by 2020," said co-founder Aditi Shrivastava.The business was conceived out of dorm-room conversations between co-founders Anirudh Pandita, 34, and Ashwin Suresh, 35. From engineering undergraduates at the University of Illinois Urbana-Champaign, the pair went on to work on Wall Street before starting their company in 2014. They were joined later by Goldman Sachs Group Inc. alum Shrivastava, now married to Suresh. Pocket Aces’ first show was launched in 2015.Unlike studios tied to traditional distribution channels, Pocket Aces focuses on mobile consumers and syndicates content to a variety of companies, from Emirates Airline to ride-hailing service Ola and Alibaba Group Holding Ltd.’s video-streaming service Youku Tudou. It has several originals lined up for Amazon and Hotstar in India and recently signed a global deal to create several shows for Netflix. It’s negotiating with multiple Hollywood production companies to create content. The firm’s average employee age is 23.“Most studios still suffer from the HIPPO effect,” said Suresh, invoking the acronym for highest-paid person’s opinion or a tendency to defer to the most senior decision-maker. “Ours is decentralized and very data-driven.”Pranav Pai, managing partner at venture backer 3one4 Capital, calls the startup’s approach a “data-driven, continuous feedback loop” that helps improve stories and production.That has allowed Pocket Aces to steer clear of the clubby Bollywood scene populated by the offspring and relatives of established actors, producers and directors. Pocket Aces crunches data to gauge the popularity of actors, who then get cast in bigger shows. “We don’t have people sitting in a room taking decisions,” Pandita added.Pocket Aces’ content tends to avoid the hero-always-wins happy-endings favored by big-budget Bollywood films, or the slower-moving plots of Indian television’s family dramas. “Young people have moved on,” Suresh said.The startup’s most successful show is Little Things, which follows an unmarried couple as they navigate emotional upheavals, career trauma and personal aspirations in fast-paced Mumbai. It started off as a short video but went on to become a multi-episode series and is now streamed worldwide on Netflix to audiences from Turkey to Latin America.Ananya Ivaturi, an undergraduate student at the University of British Columbia in Vancouver, is an ardent fan. "It’s a modern take on a cute relationship," said Ivaturi, 19. "Most of the family dramas on TV are exaggerated and irrelevant to the younger audience. They have regressive portrayals of women."Pocket Aces subtly delves into subjects such as homosexuality, cohabiting outside of marriage and divorce. In a show called What the Folks, the protagonists -- a young couple -- debate onscreen whether or not to have children, unheard-of in most Indian families. In Adulting, about two young women traversing relationship and financial crises, the characters discuss what lines can be crossed in an office romance.“There is a great hunger for good content,” Pandita said.

Pocket Aces plans to use the funds to get into gaming content, make strategic acquisitions and boost production to 30 shows a year from the current dozen.

30/07/2019

View: India shouldn't bail out stressed shadow banks By Mihir SharmaThe slowdown that began among India’s shadow banks is spreading. Sectors that had come to depend on credit from what in India are called non-banking financial companies (NBFCs) are posting awful numbers. Insurance is slowing and real estate is troubled. The automobile sector -- which contributes half of India’s manufacturing output -- is shrinking as stressed shadow banks prioritize survival above lending growth.Naturally, Prime Minister Narendra Modi’s government is worried. But it, and the Reserve Bank of India, should avoid any attempt to succor the shadow-banking sector with liquidity. Giving NBFCs the false appearance of health would only increase, not decrease the chances of a systemic crisis.Speaking to Bloomberg News recently, RBI Governor Shaktikanta Das warned that the central bank sees “some signs of fragility,” particularly in shadow banks that are exposed to the housing sector. The question is what to do about it. On the one hand, Das sought to reassure investors that the RBI would prevent another large NBFC from collapsing. (The current crisis was set off when highly connected Infrastructure Leasing & Financial Services Ltd. defaulted last year.) On the other hand, he said, “If NBFCs have undertaken certain governance practice and certain ways of function and they have to a price for it, they will have to pay a price for it.”If those two statements don’t quite seem to go together, that’s because Indian policymakers and businesses are split over the right course of action. Many executives, and some ruling-party politicians concerned about growth, would like to see the sector bailed out. Anil Ambani, a tycoon with a large stake in financial services, has said that NBFCs are in intensive care and, “in the ICU, if you want to save the patient, what is needed is not Paracetamol but full life support.”But many regulators correctly doubt that’s the best strategy. Shadow banks have come to occupy a space in the Indian economy for which they weren’t built. Some of them gorged on money raised from the public -- from state-owned banks or debt mutual funds -- to lend to long-tenure projects, some of them in politically exposed sectors such as real estate or infrastructure. NBFCs filled this niche by default: The government is short of money, there is no real corporate debt market in India, and the traditional banking system was burdened with bad loans.Policymakers have responded cautiously thus far. The government has set aside a large amount of money to recapitalize India’s state-run banks, which many hope will mean they start lending again to liquidity-starved NBFCs. (In some sense, that’s making a virtue out of a necessity: Basel requirements and their own bad-loans crisis meant banks needed the capital anyway.) To encourage state-owned banks to help clean up the NBFCs’ balance sheets, the government has also announced that it will partially guarantee their purchase of securitized pools of NBFC assets.On the other hand, the restrictions on that guarantee are stringent enough for some analysts to declare it’s too weak. Fitch points out that that struggling shadow banks “may still have to fend for themselves.”That’s how it should be. Let’s be clear: If the shadow-banking sector is to survive and be useful, more NBFCs will have to die. Indian regulators and politicians are generally terrified of anything shutting down, whether it’s a bank or an airline or a real estate company. But, in this case, they will have to stand by as it happens -- and, in some cases, administer the lethal injection themselves.What’s important is to ensure those failures don’t bring down the entire financial sector. There’s reason to believe that’s possible. In China, for example, smaller banks and NBFCs fueled growth for years. As in India, the markets generally believed that regulators would never let them collapse. But the Chinese authorities’ takeover of Baoshang Bank Co. in May this year shows that such systemic inconsistencies have a sell-by date. As Bloomberg News reported last week, that has led to a “wholesale repricing of risk for all but the largest Chinese lenders.”This new granularity in how lenders are treated is exactly what India needs as well. Indian investors should not be led to believe that the government or the RBI stands as a backstop behind sectors indulging in risky lending; that would mean that finance isn’t doing its job of correctly measuring and pricing risk. A few quarters of pain in sectors that depend upon shadow financing is a small price to pay to produce a sector that winds up doing its job efficiently and sustainably. ~ By Mihir SharmaThe slowdown that began among India’s shadow banks is spreading. Sectors that had come to depend on credit from what in India are called non-banking financial companies (NBFCs) are posting awful numbers. Insurance is slowing and real estate is troubled. The automobile sector -- which contributes half of India’s manufacturing output -- is shrinking as stressed shadow banks prioritize survival above lending growth.Naturally, Prime Minister Narendra Modi’s government is worried. But it, and the Reserve Bank of India, should avoid any attempt to succor the shadow-banking sector with liquidity. Giving NBFCs the false appearance of health would only increase, not decrease the chances of a systemic crisis.Speaking to Bloomberg News recently, RBI Governor Shaktikanta Das warned that the central bank sees “some signs of fragility,” particularly in shadow banks that are exposed to the housing sector. The question is what to do about it. On the one hand, Das sought to reassure investors that the RBI would prevent another large NBFC from collapsing. (The current crisis was set off when highly connected Infrastructure Leasing & Financial Services Ltd. defaulted last year.) On the other hand, he said, “If NBFCs have undertaken certain governance practice and certain ways of function and they have to a price for it, they will have to pay a price for it.”If those two statements don’t quite seem to go together, that’s because Indian policymakers and businesses are split over the right course of action. Many executives, and some ruling-party politicians concerned about growth, would like to see the sector bailed out. Anil Ambani, a tycoon with a large stake in financial services, has said that NBFCs are in intensive care and, “in the ICU, if you want to save the patient, what is needed is not Paracetamol but full life support.”But many regulators correctly doubt that’s the best strategy. Shadow banks have come to occupy a space in the Indian economy for which they weren’t built. Some of them gorged on money raised from the public -- from state-owned banks or debt mutual funds -- to lend to long-tenure projects, some of them in politically exposed sectors such as real estate or infrastructure. NBFCs filled this niche by default: The government is short of money, there is no real corporate debt market in India, and the traditional banking system was burdened with bad loans.Policymakers have responded cautiously thus far. The government has set aside a large amount of money to recapitalize India’s state-run banks, which many hope will mean they start lending again to liquidity-starved NBFCs. (In some sense, that’s making a virtue out of a necessity: Basel requirements and their own bad-loans crisis meant banks needed the capital anyway.) To encourage state-owned banks to help clean up the NBFCs’ balance sheets, the government has also announced that it will partially guarantee their purchase of securitized pools of NBFC assets.On the other hand, the restrictions on that guarantee are stringent enough for some analysts to declare it’s too weak. Fitch points out that that struggling shadow banks “may still have to fend for themselves.”That’s how it should be. Let’s be clear: If the shadow-banking sector is to survive and be useful, more NBFCs will have to die. Indian regulators and politicians are generally terrified of anything shutting down, whether it’s a bank or an airline or a real estate company. But, in this case, they will have to stand by as it happens -- and, in some cases, administer the lethal injection themselves.What’s important is to ensure those failures don’t bring down the entire financial sector. There’s reason to believe that’s possible. In China, for example, smaller banks and NBFCs fueled growth for years. As in India, the markets generally believed that regulators would never let them collapse. But the Chinese authorities’ takeover of Baoshang Bank Co. in May this year shows that such systemic inconsistencies have a sell-by date. As Bloomberg News reported last week, that has led to a “wholesale repricing of risk for all but the largest Chinese lenders.”This new granularity in how lenders are treated is exactly what India needs as well. Indian investors should not be led to believe that the government or the RBI stands as a backstop behind sectors indulging in risky lending; that would mean that finance isn’t doing its job of correctly measuring and pricing risk. A few quarters of pain in sectors that depend upon shadow financing is a small price to pay to produce a sector that winds up doing its job efficiently and sustainably.

The automobile sector -- which contributes half of Indias manufacturing output -- is shrinking as stressed shadow banks prioritize survival above lending growth.