Bailing-in is conducive to achieving a specific policy goal, namely that the burden of bank failures should be borne first and foremost by the private sector, rather than the taxpayer.
Indian banking sector comes out as worse-off compared to other emerging economies in terms of how little bank capital it has set aside to provision for losses on its assets, i.e., on its non-performing loans, made primarily to the industrial sector.3 What does it mean to have little bank capital as provision for losses? I like the following analogy.