At mercy of banks, India's cash-tight shadow lenders face new turmoil

Adding to the squeeze on NBFCs, the Reserve Bank of India (RBI) last month allowed banks and finance companies to offer their borrowers a moratorium on loans for three months to tide over the current crisis.

MUMBAI: India's banks are freezing credit lines to shadow lenders as the coronavirus crisis shuts down commerce in Asia's third-largest economy, but leaving this sector in the lurch risks wider financial contagion.

All major state-owned and private banks have stopped lending to non-banking financial companies (NBFCs) due to concerns about their financial health as businesses they lend to reel from the impact of the pandemic, four industry executives, who asked not to be named due to the sensitivity of the situation, told Reuters.