Two weeks ago I wrote a piece arguing that the FRDI (Financial Resolution and Deposit Insurance) Bill has two major flaws. One, the India banking system, dominated by public sector banks (PSBs), cannot suffer a systemic collapse as long as PSBs are owned by the government.
Hence the FRDI Bill is irrelevant. Second, it enshrines in law that creditors, who have nothing to do with either bank mismanagement or regulatory failure, will have to convert their money into the shares of failing banks. This is grossly unfair, especially because those who are the most culpable in financial failures ...
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