Tuesday, February 19, 2008

Northern Rock: Bank Nationalisation

As the Economist reports, Britain’s Government has decided to nationalise the ailing Northern Rock Bank, after unsuccessful efforts to sell it to a private player.

The strategy followed recently by the Reserve Bank of India in the case of ailing Indian Banks has been somewhat different. It has usually exercised its powers under the Banking Regulation Act, 1949 (Section 45) (with appropriate sanction from the Central Government) to effect a merger of ailing banks with other healthy banks.

Some of the recent examples of this approach are:

1. United Western Bank - IDBI;
2. Ganesh Bank of Kurundwad - Federal Bank;
3. Global Trust Bank - Oriental Bank of Commerce.

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