Banking on bailouts: On Yes Bank crisis

Simply one day after it positioned the financially distressed Yes Bank under a moratorium, the Reserve Bank of India announced a draft ‘Scheme of Restoration’ that entails the State Bank of India (SBI) investing capital to get a 49%stake in the reorganized personal lender. The alacrity with which the bailout has actually been proposed is commendable, considered that Yes Bank’s stock toppled 56%on the BSE on Friday, eroding shareholders’ holdings and dragging the 10- bank S&P BSE Bankex down with it, an indicator of the contagion risk that an unexpected bank resolution can pose to the financial system. The choice to suspend regular business operations raises a number of stressing concerns, both about the health of the banking sector, and the adequacy of the oversight role that regulators essay. Yes