While commercial considerations are no doubt important, the banks have been bestowed with several privileges, especially of seeking public deposits on a highly leveraged basis, and consequently they should be obliged to provide banking services to all segments of the population, on equitable basis.” Operationally, it has been made clear that RBI will implement policies to encourage banks which provide extensive services while disincentivising those which are not responsive to the banking needs of the community, including the underprivileged.
Resolving a large, multinational financial firm safely will likely always be a difficult challenge, and a great deal of work remains to be done to make these new authorities fully effective. Ultimately, though, these changes will mitigate moral hazard in our financial system by reducing expectations of government support by the creditors and counterparties of large firms.