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Govt. Withdraws Finance Resolution and Deposit Insurance Bill

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The government today has withdrawn the Financial Resolution and Deposit Insurance (FRDI) Bill, nearly a year after introducing it in the Lok Sabha. The bill has been withdrawn after there was a nationwide uproar on proposed ‘bail-in’ clause to resolve a failing bank and insurance cover on bank deposits.

The Bill stated customers would be provided deposit insurance up to a certain limit, which has not been specified, in case of a bank failure. Currently, there is an insurance up to Rs 1 lakh on deposit insurance. Under the ‘bail-in’ provision of the Bill, it was proposed that there might be cancellation of a liability towards bank deposits making people unsecured about their savings in banks.

The bill was introduced on August 10, 2017, in the House and then referred to the Joint Committee of Parliament.

A proposal to withdraw the bill was today moved by Minister of State for Finance Pon Radhakrishnan and was approved by the House.

Last week, the Committee tabled its report and had agreed with the government’s proposal to withdraw the bill.

The FRDI Bill sought to make an enabling law for the creation of an independent resolution corporation to carry out the speedy and efficient resolution of financial firms in distress, among others.

Finance Minister Piyush Goyal had informed the committee about various reasons for deciding to withdraw the bill.

The stakeholders, including the public, have raised apprehensions relating to the provisions of the FRDI Bill like the use of a bail-in instrument to resolve a failing bank and the adequacy of deposit insurance cover, Goyal had told the panel.

The bill created a lot of controversies as some experts felt that the ‘bail-in’ clause had the potential to harm deposits in savings bank accounts.

As per the report, the committee sought views of several stakeholders, including the RBI and industry bodies.

RBI Governor Urjit Patel had also expressed concerns with regard to the various provision of the bill. The banking regulator has raised issues about risk classification, information sharing between regulators and Resolution Corporation, among others.

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