Moreover, in good times, while the banks will be required to shore up capital, they may be restrained from extending indiscriminate credit. In Indian context, its implementation may have to be well calibrated by recognising structural changes in banking system due to financial deepening and the need for separating the structural factors from cyclical factors.
Third, the authorities have made it clear that they intend to protect all systemically important institutions, endow them with the capital needed to face stress conditions, protect depositors and have the shareholders alone bear any losses. To all intents and purposes banks’ other creditors are protected against losses.