Q. Which among the following group best fits in a definition of a ‘shadow banking system’?
Answer: Non banking Finance Companies, Investment banks, Hedge funds
Notes: The correct answer is "Non Banking Finance Companies, Investment banks, Hedge Funds." Shadow banking refers to financial intermediaries that operate outside traditional banking regulations. Non-Banking Finance Companies (NBFCs) provide credit and financial services without being classified as banks. Investment banks engage in activities like underwriting and trading, while hedge funds pool capital to invest in various assets, often using leverage. Together, they form a system that can create credit and liquidity similar to traditional banks but without the same regulatory oversight, which can lead to systemic risks.

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