No certainty of success with YES bailout plan

Unless a resolution mechanism designed for a quick turnaround of stressed financial institutions is implemented, we will continue to lurch from one crisis to the next

The Reserve Bank of India (RBI) and the finance ministry have formulated a bailout plan for YES bank post-haste to prevent contagion in the financial system. Contagion usually results from a shock that generates uncertainty, which in turn causes a fear induced freeze in the financial system thereby initiating a self-fulfilling death spiral.   This can only be combated by resolving uncertainty, which then restores confidence and allows market forces to operate freely. Unfortunately the RBI and the finance ministry plan tries to boost confidence without resolving the underlying uncertainty, and, in fact, even adding to it on some dimensions.  

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