But the required policy support to the housing sector cannot be ignored since construction has direct linkages with the manufacturing sector and any boost in this sector is likely to boost the manufacturing sector as well. On the other hand, with growth in the rural sector, demand for low-cost and affordable housing is expected to increase.
And, more generally, tightening regulation might set off a trend to relocate activities to the unregulated non-banks also known as the “shadow” banking sector. This is something regulators have to watch closely. Without a doubt, shadow banks can become a source of systemic risk, especially when they are highly interconnected with the regular financial system.