Govt dismisses misgivings about proposed bail-in facility for banks

Financial Resolution and Deposit Insurance Bill 2017 All you need to know

In a statement today, Ministry of Finance said, the Bill does not propose in any way to limit the scope of powers for the Government to extend financing and resolution support to banks, including Public Sector Banks. "Deposits beyond Rs 1 lakh in a bank do not have any protection guarantee. the rights of uninsured depositors are being placed at an elevated status in the FRDI Bill compared with the existing legal arrangements".

Finance Minister Arun Jaitley has sought to allay concerns of bank depositors about the safety of their savings by stating that the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, is still in the "drafting stage" and the government will ensure that the rights of depositors are protected. The Indian Banks have adequate capital and supervision to ensure safety and soundness along with the systemic stability.

However, the government ensures that FRDI provides additional protection to the depositors in more transparent manner; the government also guarantee it remains unaffected for public sector banks.

The FRDI Bill not only provides for "bail-in", but also other options to bring resolution to the financial firms on the brink of failure.

In India, it said all possible steps and policy measures are taken to prevent failure of banks and protection of interests of depositors through issue of directions/prompt corrective action measures, capital adequacy and prudential norms.

To scan and develop a proper regulations under the bill, a committee was set up in March 2016.

The bill was open for comments and views till October 31, 2016.

The bill is scheduled to be debated in the winter session of Parliament. Also it will cancel the DICGC Act to transfer the deposit insurance powers and responsibilities to the Resolution Corporation.

"The provisions contained in the FRDI Bill, as introduced in the Parliament, do not modify present protections to the depositors adversely at all".

Currently, the FRDI Bill is before a Joint Committee of Parliament and this Panel's report would be again considered by the Union Cabinet before moving the amendments if any to the Bill in Parliament.

The bill says that the provision of bail-in will not be applicable on "any liability owed by a specified service provider to the depositors to the extent such deposits are covered by deposit insurance".

The government statement comes after an onlinepetitionon Change.org against the bail-in clause of the FRDI Bill, went viral on social media, getting some 40,000 sign-ups within 24 hours.

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