With Yes Bank placed under a moratorium, depositors and businesses relying on the bank face a difficult time. A bank of this size — Rs 3.5 lakh crore worth of total assets as of end-September 2019 — has not failed in India in recent decades. When it failed, Global Trust Bank had about 0.5% of the total deposits held by scheduled commercial banks. Yes Bank holds about 1.8%. The situation presents certain short-term challenges, and highlights the need for certain reforms. In the short term, there are two interrelated challenges - protecting Yes Bank’s depositors, and maintaining trust in the private banking system.

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This article was originally published by the Hindustan Times.