What is the meaning of bailout?

The bailout is a process whereby financial support is extended to any individual, organization or even country which has financially failed and is faced with looming threat of bankruptcy. It is done in various ways like loans, bonds, stocks or cash. Bailouts may or may not require reimbursement but comes with increased governmental scrutiny and regulations. Latter include organizational restructuring, no payment of dividends to shareholders, management change, etc.

The primary reason for such a step is to support the industry which has an immense impact on lives of millions of people both nationally and internationally and is on the threshold of bankruptcy due to extended financial crises.

Bailouts can be done in many ways like direct loans, guarantees, third-party loans, direct subsidies, stock purchases etc.

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