How is Bollywood financed?

Most Bollywood productions do not get bank loans; they are funded privately. The banks do not understand or trust Bollywood. The funds required for a production are huge, and a family in the industry may be working on several projects at once. The time between investment and return can be years if the film doesn't do well. Who would have that amount of cash lying around? Only the underworld. The gangs are very happy to see black money turn into Technicolor dreams. A hit film can bring in a fourfold return on investment within the first four weeks of its release. So for the underworld, investing in films is one of the quickest ways to get a return on illegal investment. Without underworld financing, the Hindi film industry would collapse overnight. It would have to rely on financing from banks and shareholders, who do not share the cinematic taste of the dons. Their dreams would be nowhere near as extravagant, as violent, as passionate.

That is from Suketu Mehta's Maximum City: Bombay Lost and Found.