ISSN (Online) - 2349-8846
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Engineering Banking Sector Recovery and Growth

A Vasudevan (vasudevanasuri@gmail.com) was Executive Director of Reserve Bank of India and Special Adviser to the Governor, Central Bank of Nigeria.

The idea of “bail-in” in cases of serious banking instability has been widely discussed in India ever since the introduction of the Financial Resolution and Deposit Insurance Bill. Given the large non-performing loans of public sector banks, the Government of India and the Reserve Bank of India as the regulatory authority have to quickly act to ensure that public confidence in the soundness of commercial banks is not breached. In this context, three approaches are explored that could be adopted either individually or in a variety of combinations in different proportions essentially to secure banking stability. The bail-in idea should not be considered except in extreme conditions of large financial stress. The idea could be tried even before the extreme situation arises with provision of incentives.

This article is revised on the basis of excellent and incisive comments of the anonymous referee to whom the author expresses his profound thanks.

Updated On : 30th Mar, 2018

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