FRDI Bill meant to protect depositors interest says Finance Minister Arun Jaitley

Leslie Hanson
December 7, 2017

This Finance Ministry statement comes in the backdrop of fears that the "bail in" provisions in the FRDI Bill could get extended to bank deposits, putting the depositors interests into risk. It said, Government's implicit guarantee for Public Sector Banks remains unaffected.

The statement said, "The FRDI Bill will strengthen the system by adding a comprehensive resolution regime that will help ensure that in the rare event of failure of a financial service provider, there is a system of quick, orderly and efficient resolution in favour of depositors". The Joint Committee is consulting all the stakeholders on the provisions of the FRDI Bill. The Ministry of finance also added that in India all the step and policy measures are taken to prevent the protection of interests of depositors and the failure of the banks such as capital adequacy and prudential norms. But the "bail-in" clause is exactly opposite to the previous clause as depositors will lose their rightful claim to retrieve their savings in case of a failure of a bank or other deposit-taking financial institution.

Currently, each depositors of banks can be only protected upto a limit of Rs 1 lakh by the guarantee of the Deposit Insurance and Credit Guarantee Corporation (DICGC). The Indian Banks have adequate capital and supervision to ensure safety and soundness along with the systemic stability.

The bill provides for establishment of a resolution corporation with powers relating to transfer of assets to a healthy financial firm, merger or amalgamation, liquidation to be initiated by an order of the National Company Law Tribunal. It is noteworthy that the bill was opposed by the bank unions who have also requested the Finance Minister Arun Jaitley to withdraw this legislation.

If the FRDI Bill (presented in Parliament in August) becomes a law in the current shape, that will offer ammunition to the Opposition to portray it as yet another anti-people move by the Modi-government-something clearly this government can't afford after the backlash over disastrous demonetisation and poorly executed goods and services tax (GST) rollout. But, not too many would agree with this argument unless the Bill itself undergoes a change with respect to the two controversial provisions. The committee will submit its report in the upcoming winter session of Parliament beginning 15 December. There is no dilution thereof.

Other reports by Iphone Fresh

Discuss This Article