Topic Details (Notes format)

Shadow Banking and NBFC Sector

Subject: Economics

Book: Comprehensive Indian Economy - Additional Topics

Non-banking financial companies (NBFCs) offer credit outside traditional banking channels—supporting SMEs, vehicle loans, and consumer finance. However, unbridled growth risks liquidity mismatches and defaults. The IL&FS crisis highlighted the need for tighter RBI oversight on asset-liability management. Exams focus on how NBFC expansions complement banks yet require prudent regulation to prevent systemic shocks and ensure depositors’ protection.

Practice Questions

Which of the following sectors contributes the most to India’s GDP?

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What is meant by “liquidity trap”?

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What is meant by the term “current account deficit”?

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What is the “law of diminishing marginal utility”?

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What is the Phillips Curve?

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What is the primary function of the International Monetary Fund (IMF)?

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What does the “Phillips Curve” show?

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What does “primary sector” of the economy include?

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What does the term “capital account” refer to in the balance of payments?

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What is the main objective of disinvestment in public sector undertakings (PSUs)?

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