The case of the ‘bidis’ and the bank bailout has become a symbol of the need to ensure financial stability in India, which is facing a liquidity crunch as the global economy comes to a close.
The government of Prime Minister Narendra Modi, in a joint statement, has sought to portray the bank rescue as the latest effort to revive the economy.
But the bank bailouts have been plagued by delays, with many of the banks, and in some cases even the government itself, struggling to get its books back in order.
The government claims it has received at least 2.6 billion rupees ($26.2 million) in bailout loans since November, but critics say the figure is far lower.
Ahead of the announcement, the International Monetary Fund warned that India is at risk of default, as the country is facing an unprecedented economic crisis and the central bank is trying to get back to its previous levels of liquidity.
While there are signs of improvement, there is still a long way to go, and there are some concerns that a financial crisis could result.
“The government should take immediate steps to rein in the government and restore financial stability,” IMF Managing Director Dominique Strauss-Kahn said in a statement.
The case has been referred to the International Court of Justice (ICJ), the highest court in the world.
The bank rescue is the latest in a series of attempts by the government to bail out banks that it sees as a critical part of the Indian economy.
In September, it approved a bailout of a slew of banks, including two that were at the centre of the infamous Baidu-Yahoo bribery scandal.
The bailout, though initially approved by the central government, was delayed until November, when the government stepped in to provide the bailout.
The latest attempt by the Modi government to get the banks back to a stable state is an attempt to get out of the crisis without facing the full wrath of the international community, which has been calling on it to do so.
India is currently in its worst liquidity crisis in a generation.
The country’s central bank said on Wednesday that it would issue a bond with a maturity of 15 years, or $15.4 billion, to be used to shore up the economy and prevent defaults on loans.
The bond, which will be convertible into a government bond, is likely to be the most expensive one in the history of the country, but the government is hoping that it will ease financial stress and boost economic growth.
“With the current level of credit availability, the bond will help the government manage financial volatility in the short term,” said Pankaj Gajapathi Raj, the deputy chief economist at HSBC India.
“At the same time, it will help to boost lending to the sector, and it will also help in the resolution of the banking sector’s liquidity crisis.”