Improvement in sight for India's shadow lenders

But concerns still remain amongst investors amidst asset quality concerns.

More stimulus measures from policy makers will help India’s embattled shadow lenders weather some of the fallout from the pandemic, reports Bloomberg, based on latest signs showing that the sector’s ill-fortunes may just turn for the better.

A gauge measuring bond spreads of non-bank lenders strengthened last month. A custom index of shares of 20 financial firms and other companies also showed improvement.

The health of shadow banks is vital because they form the backbone of the Indian economy in lending to a wide range of borrowers from small merchants to business giants.

But despite the improvement in the sector’s health, which was hit by a credit crunch since 2018 when a large infrastructure financier defaulted, there are lingering concerns amongst investors.

“There are asset-quality issues that are emerging,” said Rajeev Radhakrishnan, head of fixed income at SBI Funds Management, India’s biggest money manager. “Government steps just address the liquidity problem the sector was facing, so it’s better to wait rather than increase investments.”

Here’s more from Bloomberg.