The Money of all depositors in public-sector banks will be protected and the level of protection will be “much higher than the level which existed till today,” Finance Minister Arun Jaitley told Lok Sabha Thursday. Talking about the Financial Resolution and Deposit Insurance (FRDI) Bill 2017 during his reply to the debate on Supplementary Demand for Grants 2017-18, Jaitley said there was no need to create a fear psychosis.
“When the [FRDI] Bill comes before the joint committee, please discuss this. There is 2011 G-20 commitment when UPA was in power and that was offtake of 2008 global crisis when the Lehman Brothers collapsed,” he said.
The FRDI Bill 2017, introduced in Lok Sabha in August, has a “bail-in” clause, which some experts say brings potential harm to deposits in the form of savings accounts.
The bill is currently undergoing scrutiny by a joint parliamentary committee. Several people, including West Bengal Chief Minister Mamata Banerjee, has written to Jaitley expressing concern about the so-called bail-in clause.
“What do we do with that clause [bail-in]? The committee has wise people which will make some recommendations. We will consider that. We are open-minded. We are very clear and the level of protection the government would want would be much higher than level which existed till today,” Jaitley said.
The FRDI Bill proposes to create a framework for overseeing financial institutions such as banks, insurance companies, non-banking financial services (NBFC) companies and stock exchanges in case of insolvency. The ‘Resolution Corporation’, proposed in the draft bill, would look after the process and prevent the banks from going bankrupt. It would do this by “writing down of the liabilities”, a phrase some have interpreted as a “bail-in”.
On the GDP growth numbers, Jaitley said any major economic reform, such as demonetisation and GST rollout, was bound to cause a dip in the GDP numbers that year. Drawing parallels with the 1991 move of economic liberalisation, he said the GDP growth had dipped the following year. “Manufacturing activity was low in the quarter around GST rollout because manufacturers were de-stocking before GST and were producing less,” he said.
Speaking about the state of the economy, Jaitley said the Indian economy growing at 7-8% is the new normal and that inflation is under control. “Exports appear to be coming back,” he said adding that in November exports were 30%, then in September and October they were at 26%.
Earlier, the Opposition had attacked the government over the impact of demonetisation and GST, saying the economy was in bad shape, the growth rate had slowed down and joblessness was growing.
Congress members had initially staged a walkout protesting against the Prime Minister’s remarks about Manmohan Singh, but Leader of Congress Mallikarjun Kharge said, “We are participating [in the discussion] because it is a constitutional matter, but our agitation and walkout continues.”
Initiating the debate, senior Congress leader M Veerappa Moily said the Prime Minister’s Economic Advisory Council has “conceded that various reasons had contributed to the slowdown” of the growth rate to 5.7% in the first quarter. Moily said the government should assess the impact of demonetisation and GST on employment in the organised and the unorganised sectors.
Saugata Roy (TMC) said demonetisation, GST, linking of Aadhaar with mobile and other services, and FRDI Bill were the “most anti-people measures taken since Independence”.
Lok Sabha approved supplementary demand for grants to the tune of Rs 66,113 crore, which includes funds to roll out schemes for providing electricity connections to the poor and payment of urea subsidies.