The controversial Financial Resolution and Deposit Insurance (FRDI) bill has been in the news every other day. This time an online petition, demanding the exclusion of the "bail in" provision of the Bill, is doing rounds and has already attracted over 1.3 lakh signatures.
Indian middle-class fears the FRDI bill in the current form, because apparently Clause 52 of the draft legislation proposes a "bail-in" provision which would give legal powers to a specially-mandated authority called the "Resolution Corporation" to invoke it. The provision apparently allows the government to use depositors' money to bail out banks on the verge of bankruptcy.
The petition, titled "Do not use innocent depositors", was floated two weeks ago and aims to gather 1.5 lakh signatures. The face behind the campaign, Shilpa Shree, said: "This bill gives power to a government entity to use depositors' money to save a bank on the verge of bankruptcy."
The joint committee reviewing the bill sought on Monday, December 18, more time from Parliament to submit its report. Following that, Lok Sabha Speaker Sumitra Mahajan said the lower house has extending the time granted to the joint panel "up to the last day of Budget Session 2018," news agency PTI reported.
According to the government, the bill is aimed to put in place a framework for overseeing financial institutions such as banks, insurance companies, non-banking financial companies (NBFCs) and stock exchanges in cases of insolvency.
The petition has been addressed to Union Finance Minister Arun Jaitley along with five members of the Joint Committee of the Bill.
The proposed bill provides depositors insurance up to a limit in case of failure. Currently, all deposits up to Rs 1 lakh are protected under the Deposit Insurance and Credit Guarantee Corporation Act, which is sought to be repealed by the proposed bill.
However, the finance minister recently tweeted to assure people that the Bill would not hurt depositors' interests.
"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," he tweeted.
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.— Ministry of Finance (@FinMinIndia) 7 December 2017
Recently, West Bengal Chief Minister Mamata Banerjee called the bill "draconian" and wrote to Jaitley requesting its immediate withdrawal. In a letter, she said people would lose faith in the banking system if the bill was not withdrawn.
"I will like to sincerely appeal to the Centre to desist from enacting this Draconian law and withdraw the bill to ensure that the common people in the country are saved from financial ruin," Mamata wrote in her letter.
Bank employee unions had in September urged the finance minister to withdraw the bill after it was tabled in the Lok Sabha in the Monsoon session.
Speaking recently at the Federation of Indian Chambers of Commerce and Industry (Ficci)'s 90th annual general meeting at in Delhi, Prime Minister Narendra Modi said: "Rumours regarding FRDI are being spread. The Central government is working towards protecting interest and rights of depositors but the rumours being spread are totally opposite."
Rumors regarding FRDI are being spread. Govt is working towards protecting interest and rights of depositors but rumors being spread are totally opposite. Contribution of institutions like FICCI important to dispel such rumors: PM Modi in Delhi pic.twitter.com/Xpia2Q2UFy— ANI (@ANI) 13 December 2017