Arun Jaitley signals rethink on Financial Resolution and Deposit Insurance bill
New Delhi: Moving swiftly to address growing disquiet over provisions in the Financial Resolution and Deposit Insurance (FRDI) bill pending before Parliament, finance minister Arun Jaitley hinted that the government may backtrack on some of its controversial provisions.
Taking to the microblogging site Twitter, Jaitley said: “The Financial Resolution and Deposit Insurance Bill, 2017 is pending before the Standing Committee. The objective of the Government is to fully protect the interest of the financial institutions and the depositors. The Government stands committed to this objective.”
The bill has received flak from various stakeholders for some of its controversial provisions including a ‘bail-in’ clause which suggests that depositor money could be used by failing financial institutions to stay afloat.
The bill empowers Resolution Corporation—envisaged as an oversight body to monitor failure of financial institutions and to limit the fallout of the failure of a systemically important financial institution on the overall sector—to cancel the liability of a failing bank or convert the nature of the liability.
The fact that no specific deposit insurance amount is prescribed has also been opposed by many stakeholders. At present, all deposits up to Rs1 lakh are protected under the Deposit Insurance and Credit Guarantee Corporation Act that is sought to be repealed by this bill.
“The provisions of the bill have been creating a lot of confusion in the minds of the people. Ultimately, bank deposits are considered the safest investment option by any investor,” said Mamta Pathania, co-project director at National Consumer Helpline and faculty member at the Indian Institute of Public Administration.
Political parties like the Congress and trade unions have characterised the provision as anti-people and anti-poor and pointed out that small depositors have to pay the price for bad lending choices of banks, especially loans given to big corporates.
Congress party is of the view that the ‘bail-in’ clause in the bill has been put with the purpose of absorbing bank’s losses and aiding its survival.
The FRDI bill, 2017 was tabled in the Lok Sabha in August this year following which it was referred to the joint parliamentary committee. The committee will submit its report in the upcoming winter session of Parliament beginning 15 December.
The bill aims to limit the fallout of failure of institutions like banks, insurance companies, non-banking financial companies, pension funds and stock exchanges.