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The changing contours of private credit

The changing contours of private credit

Hindustan Times29-05-2025
Despite a seemingly endless supply of and demand for private credit, the rapid expansion of the market has been a cause of concern for some regulators and executives. Should investors be worried? This brief explores certain aspects of private credit that warrant a close look—including the retailisation of the market and the current interest rate environment. It highlights the implications for financial stability, including the potential for finance to be rendered a disservice to the real economy.
The financial cycle is never eradicated, nor is financial instability ever really extinguished. On the contrary, financial risk moves like liquid mercury out of certain entities and into others. And increasingly credit-fuelled economies are especially prone toward credit crises. In many ways, regulation can be backward-looking, and thus can often be directed toward the last crisis. Over 17 years since the Global Financial Crisis (GFC), regulators maintain a keen focus containing banking crises; justifiably so, as the recent banking wobbles in the United States (US) in March 2023—and those which rippled across the Atlantic—demonstrate that risks are still inherent (and perhaps contagious) within the global financial system.
And yet, looking beyond the traditional banking system, potential vulnerabilities lurk within certain elements of the system of non-bank financial institutions (NBFIs). The late American economist, Hyman Minsky observed that strong medicine can have strong side effects. And one side effect of the regulation imposed upon globally systemic important banks (GSIBs) in the wake of the GFC has been for a swelling of assets under management (AUM) held by the NBFIs. As shown in Figure 1, since the GFC, the spread between the global AUM held by the shadow banks (NBFIs) and those held by the traditional banks has widened considerably. Accordingly, the Financial Stability Board (FSB) has been focused on 'strengthening the resilience' of the NBFIs on a global basis, given the lack of transparency and systemic stress testing within the industry.
This paper can be accessed here.
This paper is authored by Alexis A Crow, ORF, New Delhi.
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West Asia on the boil: The strategic fallout of Israel-Iran clashes
West Asia on the boil: The strategic fallout of Israel-Iran clashes

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West Asia on the boil: The strategic fallout of Israel-Iran clashes

The US and Israel's collaboration in dismantling Iranian nuclear facilities through the use of critical and cutting-edge technology from the air has inflicted considerable damage on Iran read more This handout satellite image provided by Maxar Technologies and dated June 29, 2025 shows a view of tunnel entrances at the Fordo (Fordow) Fuel Enrichment Plant complex, about 30 kilometres north of Qom in central Iran. AFP The recent attack and counter-attack between Israel and Iran have widened the scope of the conflict in West Asia. The long-simmering tension between them conflagrated into a condition that bordered on a full-blown war. The US and Israel's collaboration in dismantling Iranian nuclear facilities through the use of critical and cutting-edge technology from the air has inflicted considerable damage on Iran. It is difficult to assess the scope and nature of the damage to the nuclear facilities in an authoritarian country, where everything is guarded closely and access to information is not a right. Iran's clandestine pursuit of nuclear enrichment in deep underground facilities makes it difficult to determine the gravity of damage. However, Iran threatens to attack American military bases in the region. Therefore, the recent hiatus is short-lived or a sort of preparation for something consequential in the near future. STORY CONTINUES BELOW THIS AD The cycle of violence has already begun, and it may intensify sooner or later to a different level. Every move has seen a countermove in the past. For instance, Israel's attack on Iran's nuclear and military sites coincided with the latter's attack on Tel Aviv and Haifa—critical areas from security, civilian, commercial, and defence perspectives. Israel's impregnable air defence system, known as Iron Dome, was penetrated by Iranian missiles, causing considerable damage. These developments sent shockwaves worldwide concerning their possible escalation and concomitant ramifications. The potential global economic consequences of a full-scale war—or even the persistence of the ongoing conflict—will have significant geopolitical implications for the region and beyond. To understand the character of the conflict, the following aspects assume salience: Geographical Non-Contiguity Israel and Iran do not share a common border. This geographical factor is a war-negative factor. Missile exchanges between the two countries are not new. Iran has disproportionately carried out air attacks on Israel in the past. Israel's Iron Dome has usually prevented destruction. Tel Aviv has consistently directed its efforts to thwart Iran's resolve to build a nuclear warhead. The former strikes the latter's nuclear facilities to prevent the completion and test-firing of a nuclear perceives an existential threat from Iran, which is determined to destroy Israel for ideological and religious reasons. Geography is a significant deterrent. Iran uses Iraqi and Jordanian airspace to attack Israel. Israel also uses Syrian and Iraqi airspace to carry out air offensives against Iran. Aerial war using other nations' airspace is untenable and expensive in the long run. Air defence and AI-based disabling technology may render missiles imprecise and erratic. Israel has reportedly taken control of Iranian airspace, posing an enormous challenge to Iranian air power. Sanctioned Iran and the Nuclear Issue Iran is the most sanctions-affected country in the world. International sanctions were imposed and expanded against Iran for obstinately pursuing its nuclear programme, creating regional disorder, and for its debilitating human rights record. These chronic sanctions have proven economically disastrous. Today, China is the largest importer of Iranian crude. Sanctions have affected Iran's crude exports to other countries. The barrage of sanctions has hit its economy. Funding proxies, uranium enrichment, and nuclear facilities have drained its resources. Domestic investment for progress and quality of life has shrunk abysmally. Tehran continues its nuclear programme despite sanctions. Its nuclear issue is the most pressing one in the region. Iran enriched uranium up to 60% purity, prompting Israel to allege that Tehran is closer to producing nuclear weapons. It launched 'Operation Rising Lion', attacking Isfahan, Natanz, and other Iranian nuclear facilities. Fordow, Iran's most fortified underground nuclear facility, has many centrifuges that remain immune to Israeli attack. STORY CONTINUES BELOW THIS AD However, several factors constrain Tehran's nuclear ambition. Iran, the P5, and Germany signed the Joint Comprehensive Plan of Action (JCPOA)/Iran nuclear deal in 2015, limiting uranium enrichment to 3.67 per cent, sufficient for electricity production. However, Trump withdrew from the deal in 2018, citing inherent weaknesses in the treaty. After the US withdrawal, Iran further enriched its uranium. Tehran maintains that it has every right to harness nuclear energy for peaceful purposes. This is just a statement, contradicting Iran's professed objective of Israel's destruction. On the other hand, International Atomic Energy Agency (IAEA) Director General Rafael Grossi, in a June 2025 address, said, 'Unless and until Iran assists the agency in resolving the outstanding safeguard issues, the agency will not be in a position to provide assurance that Iran's nuclear programme is exclusively peaceful.' The first round of Iran-US nuclear talks was held in Muscat in April 2025 with Oman's mediation. The sixth round of talks halted in the wake of the conflict. However, Iran has said it is ready for diplomacy with the US, provided Israel stops its aggression. STORY CONTINUES BELOW THIS AD Understanding the regional geopolitical dynamics of West Asia through the lens of structural realism, one can ask: Will Iran weaponise nuclear power to checkmate Israel and intensify anti-West proclivities? Be that as it may, Iran's ideological moorings and theological orthodoxy indicate the likelihood of using nuclear capacity for veto power and obstructionist politics. Ideological Antithesis Iran is ideologically anti-West. The Shia Islamism of Iran is an antithesis to Western liberalism, democracy, gender equality, and religious freedom. Israel is pro-West and pro-US. Iran does not acknowledge Israel as a state and treats it as an occupying power. 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It has wings such as a ground force, Basij paramilitary, naval force (patrolling the Strait of Hormuz), air force (handling the missile programme), and cyber command (espionage and propaganda). It supports armed non-state actors to resist Western systems and views Israel as a perpetual enemy. STORY CONTINUES BELOW THIS AD Its proxies include Al-Ashtar Brigades in Bahrain; Kata'ib Hezbollah, Badr Organisation, Asa'ib Ahl al-Haq, Hezbollah Harakat al-Nujaba, and Kata'ib Sayyed al-Shuhada in Iraq; Hezbollah in Lebanon; Palestinian Islamic Jihad and Hamas in Palestine; Fatemiyoun Brigade, Zainabiyoun Brigade, Quwat al-Ridha, and Baqir Brigade in Syria; and the Houthis in Yemen. The Quds Force handles external missions while Basij suppresses domestic unrest. Regional Faultlines Turkey, Iran, and Saudi Arabia compete for Islamic leadership. Saudi Arabia is naturally positioned for this role due to its custodianship of Islam's two holiest sites—Mecca and Medina. 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'Your System Is Infected': ED Busts Fake Call Centres In Chandigarh That Duped Foreign Nationals
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GIC Boosts Americas Exposure to 49%, Eyes AI Deals in US
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Mint

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GIC Boosts Americas Exposure to 49%, Eyes AI Deals in US

(Bloomberg) -- Singapore's GIC Pte ramped up investments in the Americas while its Asia-Pacific holdings declined, as the giant sovereign wealth fund wagers that the US will benefit most from the artificial intelligence boom. North and South America accounted for 49% of GIC's assets as of March, up from 44% a year earlier. Asia-Pacific assets fell to 24% from 28%, according to the fund's annual report released Friday. Europe, the Middle East and Africa were unchanged at 20%. The shift comes as GIC expects a slowdown in the second half of the year alongside rising inflation and uncertainty driven by domestic and geopolitical pressures. The fund's annualized five-year return rose to 6.1% in nominal US dollar terms, up from 4.4% a year earlier. GIC doesn't publish yearly performance figures. 'The forces of change have clearly intensified and will be much harder to prepare for,' said Chief Executive Officer Lim Chow Kiat. He added in a letter accompanying the report that '2025 may be a turning point in markets — and in history.' GIC, which consulting firm Global SWF estimates has assets under management of $936 billion, is aiming to ramp up deals in artificial intelligence. Lim cited the technology — and AI's effect on US companies in particular — as a reason why some of its geographic holdings may change. Global SWF Managing Director Diego Lopez estimated that GIC's annual return was about 10.8%, which he said was 'good but not great.' The firm's 10-year annualized returns of 5% are slightly below average compared with the sovereign wealth funds it tracks, he said. 'It's also way below what a 60/40 traditional portfolio would've returned, which is 7.5% in this period of time,' Lopez said. 'The performance could be better.' GIC's AI investments in the US include Atlan, and Ramp, a financial operations firm in New York. 'The US is a huge market, continues to be very innovative, and trends like AI benefits the US the most,' because there are many American companies that can leverage the technology, Lim said in an interview. 'To the extent that the US is allowing us to deploy more capital, the percentages in other regions will become smaller.' Despite the shift away from Asia-Pacific, GIC still sees opportunities there. Group Chief Investment Officer Bryan Yeo said the fund expanded its investment team in Japan over the past year and continues to evaluate deals in India and China. GIC has also anchored several recent initial public offerings in Hong Kong as a cornerstone investor. 'Our base case is really lower growth and, on the margins, higher inflation,' Yeo added. 'We have to get over the higher valuations that we see in India — so it's always figuring out 'is the opportunity in India priced relative to its growth prospects?'' GIC reduced the level of detail it publishes about its investments. 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Within equities, the fund increased investments in the US, which remains its largest market by capital deployment. The reduced disclosure from the firm, which doesn't reveal the value of its assets, comes as countries around the world increase scrutiny of foreign investors amid rising populism and national security concerns. 'It's most important to present information in a way that allows you to have a good idea of what GIC's portfolio is like,' said Lim. 'We believe that we are providing sufficient information for the understanding of our stakeholders.' Lopez said the decrease in fixed income was likely due to the rising valuations of US 'Magnificent Seven' tech stocks and increased deployment in the private equity space across America. And the shrinking allocation to Asia-Pacific was probably from reductions in the value of assets in China and Japan, he added. But he said GIC's decision to provide much less granular detail on its investments made it hard to be certain, and that its actions matched a trend started by some sovereign wealth funds in the Middle East — which earlier this year similarly cut back on the amount of detail they disclose about their portfolios. 'This reduction in information is quite concerning,' said Lopez. He said the Singapore investor is a signatory member of the Santiago Principles, which advocate for transparency and good governance, yet 'they're becoming less and less transparent with time.' (Updates SWF's estimate of GIC's assets under management in the fifth paragraph, adds quotes and other details.) More stories like this are available on

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