Defending the provisions of the Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill), the government said Thursday that the clauses in the legislation are aimed at safeguarding the interests of depositors.
“The provisions contained in the FRDI Bill, as introduced in the Parliament, do not modify present protections to the depositors adversely at all. They provide additional protections to the depositors in a more transparent manner,” the finance ministry said in a statement. “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… 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,” the government said.
The FRDI Bill 2017 was tabled in the Lok Sabha in August, following which it was referred to the joint parliamentary committee. The committee will submit its report in the upcoming winter session of Parliament starting December 15. The Bill has been facing criticism for some of its provisions, including a “bail-in” clause that reportedly suggests that depositor money could be used by failing financial institutions to stay afloat.
The FRDI Bill aims to limit the fallout of the failure of institutions like banks, insurance companies, non-banking financial companies, pension funds and stock exchanges. But some of its provisions have been termed “anti-people” by the opposition parties on the grounds that people’s money would being used to bail out banks that made bad lending decisions.
The government’s statement reiterated its commitment to support banks. “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 statement said.