The separation of banking activities from non-banking activities limits the risk of contagion from nonbanking business to the bank, and allows management to focus on their core business of banking. In line with Basel III requirements, these banks are made to hold higher capital requirements.
In part, India’s slowdown paradoxically reflects the substantial fiscal and monetary stimulus that its policymakers, like those in all major emerging markets, injected into its economy in the aftermath of the 2008 financial crisis. The resulting growth spurt led to inflation, especially because the world did not slide into a second Great Depression, as was originally feared.