After IL&FS blew up, the funding market froze, and the credit industry cried mommy, begging the central bank to act as the lender of the last resort.

Rajan strongly opposed the idea of handing supervision of the government securities market to the stock-market regulator.

India is home to nine of the world's 10 most-polluted cities. Beyond the health risks, the smog crisis threatens to erode competitiveness just when the country is starting to boast of rapid improvements in its ease-of-doing-business rankings.

If the standoff with the government gets any worse, a test of the central bank's dire warning could come soon.

Individual investors started returning to collective investment vehicles after the 2014 general elections, hoping for a reset to an economy held back by corruption scandals and policy paralysis. They doubled down after Prime Minister Narendra Modi's shock November 2016 currency ban pulled 86 percent of people's cash into bank accounts.

Now that the government is backing its liabilities, IL&FS presumably can survive on a thinner layer of equity than it would have otherwise needed.

The world's biggest repository of citizen information, India's Aadhaar database, is now beyond the private sector's reach. That was the verdict last week by the country's top court, which refused to strike down the entire biometric-based system as unconstitutional. Now only the government can use it, and that's a problem.

Infrastructure Leasing & Financial Services (IL&FS) Ltd. had 30 years to spawn an Indian clone of Macquarie Group: a powerhouse of finance, investments, asset ownership and risk management. Instead, Ravi Parthasarathy, the founder who stepped down recently as chairman, went on to build an unwieldy, debt-fueled empire that has now crumbled.

It's important for the Reserve Bank of India to join forces with the Securities and Exchange Board of India to deal with the fallout. Their urgent first step must be an emergency bailout of IL&FS, before it does more harm.

IL&FS and its associates have $12.5 billion in debt, of which $500 million is due over the next six months.

Repugnant as the idea may be to taxpayers, socializing losses is often the only way to avoid panic from spreading.

In the chaotic final months of 2016, angry citizens were slamming the Reserve Bank of India by calling it the "Reverse Bank." It's taken Governor Urjit Patel, who had only recently stepped into the top job, almost two years to reassert his authority and reestablish the institution's credibility with a couple of notable successes just this week.

India is pegged to be a $1 trillion digital economy by 2025, and Bezos, Ambani, and Walmart-Flipkart all want a piece of the action.

If LIC cares about its fiduciary responsibility to policyholders, it will pass this one up. But then, it can never say no to New Delhi. LIC already owns about 11 percent of IDBI, thanks to its previous participation in rescue missions.

Chanda Kochhar, the chief executive officer of India's second-biggest lender, has left the building, and her new deputy should waste no time in letting stakeholders know who the real boss is: It's him.