NEW DELHI: An immediate bail-out package for the troubled private lender Yes Bank will keep India’s banking sector contagion at bay, said global rating agency S&P, but warned that the rescue plan poses pain for investors in bank hybrid securities, tightening credit markets and a possible wider economic pain in the country.
"Quick resolution of YES Bank’s insolvency will keep India bank-sector contagion at bay, though it poses pain for investors in bank hybrid securities. As credit markets tighten, we also see a possibility of wider economic pain in the country," S&P said.
The agency said the government has consistently supported weak commercial banks by promoting the merger of distressed institutions with stronger lenders and has historically not allowed commercial banks to fail and has in the past swiftly stepped in to address trouble.