The paper projected this as a brilliant new effort to ‘save’ the bank and said that it has the support of the administrator appointed by the Reserve Bank of India (RBI). The decision was apparently taken at a meeting of 30 big depositors at the Dadar Gurdwara.
It is important to understand and analyse the implications of such a weird proposal. In a nutshell, large depositors are coming forward to help salvage/revive the Bank. On hearing just the basics of it, MG Bhide, former chairman of Bank of India (RBI) and former board member of the Deposit Insurance and Credit Guarantee Corporation of India (DICGC) spontaneously exclaimed – this is a ‘bail in’.
Effectively, the depositors are offering to ‘bail in’ the bank, while smaller depositors get back their money.
This “bail in” is slightly different and with dubious portends for Indian bank depositors in general. ‘Bail-in’ of banks by their depositors is a highly controversial and contentious proposal which the government of India has been…