ScienceGuy

Shadow banking system fascinated me, especially post-2008 crisis when I realised their importance in the system. NBFCs are not allowed by the central banks, to operate in the same way as the regular banks, e.g., while banks are allowed to accept deposits (like savings accounts), NBFCs are not allowed to do so. Also, unlike banks, NBFCs do not have to follow stringent guidelines that the central bank sets for the banks.  There's a reason why NBFCs are called "shadow banks" - because they operate in the shadows of the scheduled banking system. Although there are some, broad-level regulations for the NBFCs mostly they remained out of the purview of central banks. This was also because NBFCs were not looked at with great concern, as their growth was in the "shadows" - at a distance from the regulatory eyes. The central banks - the ultimate regulators, until recently didn't realise how big the NBFC system had become and how much of an integral part of the system

Click here   to read the summarized Richard Werner's paper titled " H ow do banks create money, and why other firms cannot do the same? An explanation for coexistence of lending and deposit taking ". "Thanks to the recent banking crises interest has grown in banks and how they operate. In the past, the empirical and institutional market micro-structure of the operation of banks had not been a primary focus for investigations by researchers, which is why they are not well covered in the literature. One neglected detail is the banks' function as the creators and allocators of about 97% of the money supply (Werner, 1997, 2005), which has recently attracted attention (Bank of England, 2014a,b; Werner, 2014b,c). It is the purpose of this paper to investigate precisely how banks create money, and why or whether companies cannot do the same. Since the implementation of banking operations takes place within a corporate accounting framework, this paper is based upon a com