RBI's out-of-the-box solutions may strengthen India's banking sector

Whether YES Bank, PMC Bank or LVB, year 2020 has seen the regulator taking market-oriented solutions to rescue failed banks

Beleaguered lenders YES Bank, Punjab and Maharashtra Co-operative Bank (PMC Bank), and Lakshmi Vilas Bank (LVB) have a common link, besides being troubled names. 

When in deep distress, the Reserve Bank of India (RBI) did not go for the tried-and-tested measure of merging them with a public or private sector bank. Rather, it took a different approach towards their rescue. In the case of YES Bank, State Bank of India took only 49 per cent stake (with private lenders acquiring a smaller stake) to ensure stability. PMC Bank, placed under moratorium in September 2019, stunned many by welcoming applications from