Government says new FRDI Bill won't take away your money in the bank, but protect it better

The Centre said that the provisions of the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 are meant to protect the interests of depositors. Here is all you need to know.

IndiaToday.in  | Posted by Vivek Surendran
New Delhi, December 7, 2017 | UPDATED 14:16 IST
FRDI Bill is meant to protect inrestests of depositors, the centre government said.FRDI Bill is meant to protect inrestests of depositors, the centre government said.

The Ministry of Finance has said that the provisions of the Financial Resolution and Deposit Insurance Bill, 2017, were meant to protect interests of depositors. Allaying fears about the bail-in provisions that are being seen as making your bank deposits unsafe, the ministry said the bill does not change the present protections to the depositors.

"Certain misgivings have been expressed in the media regarding "bail-in" provisions of the FRDI Bill," one of the tweets from the Ministry of Finance said.

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

The central government maintains that these provisions provide additional protections to the depositors in a more transparent manner.

Presently, each person who makes a deposit 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 remaining deposits, that is, beyond Rs 1 lakh of deposits in a bank, depositors do not have any deposit protection guarantee and are treated at par with claims of unsecured creditors as of now.

Besides providing similar protection / guarantee of Rs 1 lakh to depositors as it exists today, the Centre said, the rights of uninsured depositors are being placed at an elevated status in the FRDI Bill compared to the existing legal arrangements over the unsecured creditors and even government dues.

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, according to the finance ministry.

"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. issue of directions / prompt corrective action measures, capital adequacy and prudential norms)."

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, the government said.