DAINIK NATION BUREAU
Commenting on the rumours, which are running in social media, over the provisions of the Financial Resolution and Deposit Insurance (FRDI) bill, union finance minister Arun Jaitley has clarified the government’s stand on it. He reiterated that government is committed to strengthen PSU banks and financial institutions. For this around Rs 2.11 lakh crore capital infusion is being made to strengthen the public sector banks so there was no question of any lending failing.
Talking about the depositors concern over provisions of a draft law, Jaitley said that the government will fully protect public deposits in financial institutions and given enough hint that government is open to make changes in the proposed FRDI Bill.
Jaitley said the government’s massive plan to capital infusion in banks to strengthen banks and there was no question of any lender failing. Even if such situation arises, the government will fully protect the customers’ deposits.
Jaitley made the comment to clarify public concerns with regard to a provision in the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, which was first introduced in the Lok Sabha in August this year. Currently being scrutinized by a joint parliamentary committee. Government would consider the recommendation of the JPC.
The so-called “bail-in” clause in the draft legislation has been commented upon by experts as of bringing potential harm to deposits, in the form of savings accounts.
The FRDI Bill proposes to create a framework for overseeing financial institutions such as banks, insurance companies, non-banking financial services (NBFC) companies and stock exchanges in case of insolvency.
The ‘Resolution Corporation’, proposed in the draft bill, would look after the process and prevent the banks from going bankrupt. It would do this by “writing down of the liabilities”, a phrase some have interpreted as a “bail in”.
The draft bill empowers Resolution Corporation to cancel the liability of a failing bank or convert the nature of the liability. It does not specify deposit insurance amount. At present, all deposits up to Rs 1 lakh are protected under the Deposit Insurance and Credit Guarantee Corporation Act that is sought to be repealed by this bill.