NEW DELHI: The
Financial Resolution and Deposit Insurance (
FRDI) Bill, 2017 created much mass hysteria among bank customers. We answer the most important questions concerning them.
Q: What is FRDI Bill?
A:
The Financial Resolution and Deposit Insurance Bill (FDRI) bill aims to set up a resolution corporation which will monitor financial companies, categorise them as per their risk profiles and step in to prevent them from going bankrupts by writing down their liabilities.
Q: Why is it being feared?
A:
The fear stems from the Bill's bail-in clause which empowers the resolution corporation to rescue a failing financial institution through the help of creditors and depositors money. Bail-in is, however, one of the many options to rescue a financial institution on the brink of failure.
Q: How much of depositors' money can be used to bail-in?
A:
Barring money which is insured, rest of the money can be subjected to bail-in clause. However, in order to utilise this money, a bail-in clause has to be incorporated at the time of making a deposit. Even today, only a small amount of Rs 1 lakh of bank deposits is insured in case of a bank going bankrupt.
Q: Isn't insurance coverage of Rs 1 lakh for deposits quite less?
A:
Yes, but that might change with resolution corporation replacing DICGC and setting up new deposit insurance limit.
Q: How can you reduce your risk?
A:
As of now, there is is no need to panic as banks in India in last 50 years have hardly been liquidated. However, you can cut your risk by diversifying your deposits across banks if you hold large sums above the new insurance limit.
FRDI Bill, 2017 created much mass hysteria among bank customers.
