The Indian Finance Ministry had cleared the myths surrounding the FRDI (Financial Resolution and Deposit Insurance Bill). Clarifying on the same, the Finance Minister Arun Jaitley said that the proposed FRDI Bill protects the rights of depositors in every way.
“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 depositors,” Mr. Jaitley said in a tweet. The government stands committed to this objective, he added.
The Central government further said that the provisions contained in the FRDI Bill, will not modify present protections to the depositors. It also clarified that these provisions would, in turn, provide additional protections to the depositors in a more transparent manner.
It also clarified that FRDI Bill is far better depositor-friendly than the other jurisdictions, which provide for statutory bail-in, where the consent of creditors/depositors is not required for bail-in.
Currently, a person who deposits money in the banks can be only protected up to a limit of Rs 1 lakh by the guarantee of the Deposit Insurance and Credit Guarantee Corporation (DICGC).
For the deposits of 1 lakh, depositors weren't given any deposit protection guarantee and are treated at par with claims of unsecured creditors as of now.
Apart from giving similar protection/guarantee of Rs 1 lakh to depositors as it exists today, the Centre said, the rights of uninsured depositors are given high importance in the FRDI Bill compared to the existing legal arrangements over the unsecured creditors and even government dues.
"The FRDI 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. Government's implicit guarantee for public sector banks remains unaffected," the government said in a press release.
The release added that Indian Banks have adequate capital and are also under prudent regulation and supervision to ensure safety and soundness, as well as systemic stability. "The existing laws ensure the integrity, security, and safety of the banking system. In India, all possible steps and policy measures are taken to prevent the failure of banks and protection of interests of depositors (e.g. the issue of directions / prompt corrective action measures, capital adequacy, and prudential norms)."
The FRDI Bill will further strengthen the system by adding a comprehensive resolution regime that will help ensure that, in the rare event of failure of a financial service provider, there is a system of quick, orderly and efficient resolution in favor of depositors, the government said.