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Shadow Banking Video Lecture - Indian Economy for UPSC CSE

FAQs on Shadow Banking

1. What is shadow banking?
Ans. Shadow banking refers to financial activities performed by non-bank financial institutions that operate outside of the traditional banking regulations and formal banking system.
2. How does shadow banking differ from traditional banking?
Ans. Shadow banking institutions do not accept traditional deposits like banks but still perform functions such as lending and credit intermediation. They operate in a less regulated environment compared to traditional banks.
3. What are some examples of shadow banking activities?
Ans. Examples of shadow banking activities include securitization, hedge funds, money market funds, and peer-to-peer lending platforms.
4. Why has shadow banking become a concern for regulators?
Ans. Shadow banking activities can pose risks to financial stability due to their lack of oversight and regulation. They can also amplify systemic risks during periods of economic downturns.
5. How can regulators address the risks associated with shadow banking?
Ans. Regulators can address the risks associated with shadow banking by implementing stricter regulations, increasing transparency in the sector, and monitoring potential systemic risks.
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