The finance minister’s statement came after doubts had been raised over the Financial Resolution and Deposit Insurance Bill, 2017, (FRDI Bill) .
Addressing the raising concerns over the FRDI Bill, finance minister Arun Jaitley on Monday said deposits made by public in banks and other financial institutions will be protected.
The finance minister’s statement came after doubts had been raised over the Financial Resolution and Deposit Insurance Bill, 2017, (FRDI Bill) .
Assuring the citizens, the Finance Ministry has said, "The provisions contained in the FRDI Bill, as introduced in the Parliament, do not modify present protections to the depositors adversely at all. They provide additional protections to the depositors in a more transparent manner."
"The FRDI Bill will 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 favour of depositors", it added.
FRDI bill has been criticized by experts over some of its controversial provisions, one of which has been a "bail-in" clause which stated that depositor money could be used by failing financial institutions to stay afloat.
The Bill also seeks to deal with insolvency of financial service providers. It provides for establishment of a resolution corporation with powers relating to transfer of assets to a healthy financial firm, merger or amalgamation, liquidation to be initiated by an order of the National Company Law Tribunal. It can also designate certain financial providers as systematically important financial institutions, the failure of which may disrupt the entire financial system, said the 'Statement of Objects and Reasons' of the Bill.
"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," the government said.
The FRDI Bill 2017 was tabled in the Lok Sabha in August.
Meanwhile, the Financial Resolution and Deposit Insurance Bill (FRDI) 2017, which will be tabled in the winter session of the parliament, may get redrafted following concerns raised by the stakeholders. The Joint Parliamentary Committee (JPC) which is considering the Bill has met 60 stakeholders, including the regulators -- Reserve Bank of India, Sebi and Irda-- apart from the nationalised and private banks, to get feedback on FRDI 2017.
JPC is looking at all aspects of the Bill to build a consensus. Major concern in the Bill is on the bail-in clause, which enables the resolution commission that will be formed under the law to utilise the money of the depositors to bail out the banks if there is a need.
A member of the JPC told DNA Money, "The bail-in clause is only an enabling clause. Even now, depositors get a protection only up to Rs 1 lakh of their deposits. Now, in this case if his deposits are utilised, then he will get bonds or security papers in exchange for his money. He is getting more of a protection. Anyway, we are debating it and its various clauses are under consideration. Every point will be debated and we will arrive at a consensus before it is made into a Bill."
The JPC member said, "Every concern will be considered," adding that they are not in a hurry to finalise it. "The debate on the bill will continue till the Budget session," he said.
Meanwhile, the Ministry of Finance tried to assuage the fears of depositors in a release.
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 "Deposits made by citizens in banks will be protected: Arun Jaitley")
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