Here's a list of things that happened when a big bank was allowed to fail back in 1960 (Palai Central Bank)
1. A run on the bank.
Without a withdrawal limit in place, depositors rushed to withdraw their savings once they figured the bank was in trouble
1. A run on the bank.
Without a withdrawal limit in place, depositors rushed to withdraw their savings once they figured the bank was in trouble
2. The ensuing panic spreads to other banks as well.
3. RBI was castigated in the press, parliament and in the streets for not doing enough
4. India becomes only the second country after the USA to offer Deposit Insurance in a bid to protect the interest of the common man.
5. RBI goes on the back foot
Between 1969 and 1994 RBI issues a grand total of 0 banking licenses. Until in 1994, 10 new banking licenses were issued. Prominent among them, ICICI Bank, HDFC Bank and Axis Bank
Between 1969 and 1994 RBI issues a grand total of 0 banking licenses. Until in 1994, 10 new banking licenses were issued. Prominent among them, ICICI Bank, HDFC Bank and Axis Bank
So maybe sometimes it's prudent to not let a bank fail? Thoughts and comments welcome :)
