In future, investors will be first in line to shoulder the costs of bank failures – and rightfully so, since they were the ones that assumed the risks and benefited from the returns in the first place. An essential requirement for the credibility of the bail-in regime is the existence of sufficient bail-in-able capital.
An approach to reform of urban cooperative banks and rural cooperatives has been drawn up with the recommendations of the Madhava Rao Committee and the Jagdish Capoor Committee. There are significant legal and institutional changes that need to be addressed to ensure further progress in imparting competition without serious systemic implications, including ensuring availability of adequate credit to rural areas and agriculture.