The contentious Financial Resolution and Deposit Insurance (FRDI) Bill has been withdrawn. In a motion before the joint committee on FRDI Bill, Finance Minister Piyush Goyal said the Bill was being withdrawn because of apprehensions in the minds of the public about several provisions in the Bill.
The FRDI Bill was tabled in the Lok Sabha during the Monsoon Session last year and subsequently sent to a joint committee of both houses for legislative scrutiny. The Bill, which was the government’s response to mounting bad loans in Indian banks — a case in point being diamantaire Nirav Modi and his dealings with the Punjab National Bank (PNB) — establishes a Resolution Corporation to monitor financial firms, anticipate risk of failure, take corrective action, and resolve them in case of such failure. The Corporation will also provide deposit insurance up to a certain limit, in case of bank failure.
It has provisions of dispute resolution through mergers and acquisitions, or transfer of assets to another firm or liquidation. If resolution is not completed within a period of two years, the third option will be executed, the Bill laid down.
Several opposition parties have been opposing the Bill, as have been bank employees’ unions and industry associations such as Assocham. The latter had said that the Bill runs the risk of eroding the country’s trust in the banking system.
The Trinamool Congress has held several protests in Parliament against the “draconian” provisions of the Bill. Party chief Mamata Banerjee had described the Bill as the “biggest assault on financial security of the poor and the middle classes”.
In the motion dated July 20, Goyal told the joint committee chaired by Rajya Sabha MP Bhupendra Yadav: “Stakeholders, including public, have raised apprehensions relating to provisions of the FRDI Bill like the use of bail in instrument to resolve failing banks, the adequacy of deposit insurance cover and the felt need to revise insurance limit substantially and application of resolution framework for public sector banks.”
He said the Bill was being withdrawn because the resolution of all these concerns would need time and a comprehensive examination of the Bill. The “bail-in” clause, which is perhaps the most controversial in the Bill, empowers financial institutions which are in a state of difficulty to use depositors’ money to bail themselves out of a sticky situation.
Confirming that the Bill has been withdrawn, Trinamool MP Sukhendu Shekhar Roy, who is a member of the committee, said, “Good sense finally seems to have prevailed on the government. This is a victory of the people.”