The Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill) will not hamper consumer’s money kept in the bank and ensure greater protection to the depositors, said Ministry of Finance defending the bill against the recent apprehensions.
The statement comes in the wake of concerns raised regarding “bail-in” provisions in FRDI Bill. The provisions mentioned Bill, as introduced in the Parliament; do not alter the protections for any of the depositors.
The Ministry of Finance has rather clarified that depositors are provided with extra protection in a more transparent manner. The bill was initially introduced in the Lok Sabha on August 10 and now under the consideration of a joint committee of Parliament, set up to consult all stakeholders on the provisions of the proposed bill.
“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,” said Arun Jaitley, the Union Finance Minister.
According to present regulation, bank depositors only get protection to a limit of Rs 1 Lakh by the guarantee of Deposit Insurance and Credit Guarantee Corporation (DICGC), and rest of the deposits over Rs 1 lakh are treated at par with claims of unsecured creditors, and in case of liquidation of a bank, such depositor are only paid after preferential payments are settled.
The FRDI Bill proposes to establish a Resolution Corporation for protection of consumers. After the setting up of this entity, deposit insurance powers and responsibilities will be handled by the Resolution Corporation.
“The FRDI Bill is far more depositor friendly than many other jurisdictions, which provide for statutory bail-in, where consent of creditors / depositors is not required for bail-in,” said the Ministry of Finance.