FRDI Bill will protect the rights of depositors, says FM Jaitley
Apart from giving protection guarantee of Rs 1 lakh to depositors, the FRDI Bill will also look into the rights of uninsured depositors compared to the existing legal arrangements over the unsecured creditors and even government dues.
Finance Minister Arun Jaitley on Thursday said that the proposed Financial Resolution and Deposit Insurance Bill, 2017 will protects the rights of depositors.
Denying reports to the contrary, Jaitley in a tweet said, “The Financial Resolution and Deposit Insurance Bill, 2017 is pending before the Standing Committee. The objective of the government is to fully protect the interest of the financial institutions and depositors.”
Meanwhile, the Finance Ministry statement on Thursday also said the FRDI Bill, introduced in the Lok Sabha on August 10, 2017, presently under the consideration of the Joint Committee of Parliament, does not modify present protections to the depositors adversely at all.
It rather provides additional protections to the depositors in a more transparent manner.
The statement said, "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."
Currently, each depositors of banks can be only protected upto a limit of Rs 1 lakh by the guarantee of the Deposit Insurance and Credit Guarantee Corporation (DICGC). While beyond Rs 1 lakh of deposits, do not have any protection guarantee and are treated, at par with claims of unsecured creditors as of now.
Apart from giving protection guarantee of Rs 1 lakh to depositors, the FRDI Bill will also look into the rights of uninsured depositors compared to the existing legal arrangements over the unsecured creditors and even government dues.
Shutting out misgivings in regards to provisions of the FRDI bill, the Ministry said, "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."
In case for banks, the ministry stated that they have adequate capital and are also under prudent regulation and supervision to ensure safety and soundness, as well as systemic stability.
It further added, "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 ministry was confident in ensuring that the bill focuses in maintaining the integrity, security and safety of the banking system. At present, all possible actions have been taken to prevent he failure of banks and protection of interests of depositors.
Key Highlight of the Financial Resolution and Deposit Insurance Bill, 2017.
- It was brought to attention by the Union Finance Minister Arun Jaitely during the Budget 2016-17 speech.
- To scan and develop a proper regulations under the bill, a committee was set up in March 2016. It was set under the chairmanship of Ajay Tyagi additional secretary, Department of Economic Affairs, Ministry of Finance.
- FRDI aims to bring in discipline among the financial service providers by initiating a limit on the use of public money to bail out distressed firms.
- The bill was open for comments and views till October 31, 2016. Thus, after the consideration, the Union Cabinet in June 2017, approved the proposals made under FRDI Bill.
- The bill will also revoke the amendment of resolution-related provisions in sectoral Acts as listed in Schedules of the Bill. Also it will cancel the DICGC Act to transfer the deposit insurance powers and responsibilities to the Resolution Corporation.
- The Joint Committee is consulting all the stakeholders on the provisions of the FRDI Bill. The committee will submit the report in the upcoming winter session of Parliament starting on December 15.
Subhash Chandra Garg, Secretary, Department of Economic Affairs on Wednesday said, "FRDI Bill proposes to protect existing rights of the depositors. There is no dilution thereof. Instead it enhances present protections in certain ways. Principal guarantee for PSU Banks’ depositors come from Government ownership which also remains completely unaffected."
Click here to know all about the bill submitted in Lok Sabha.
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