Is the "Bail-in" clause of the Financial Resolution and Deposit Insurance Bill is a cause to worry?
What are the ramifications of the Bail-in clause of the Financial Resolution and Deposit Insurance Bill for the general public? Will it have an adverse effect? Discuss this new clause & its possible effects.
The Government has proposed a bill called Financial Resolution and Deposit Insurance (FRDI) as a part of banking reforms and to resolve the conditions of the failing banks. The position of the banks is far from satisfactory as the Non-Performing Assets( NPA ) are mounting. We have a Deposit Insurance and Credit Guarantee Corporation (DICGC) which guarantees the payment of deposits of Rs one lakh and under. Under the new bill, the DICGC will be replaced with a Resolution Corporation under the Ministry of Finance. Resolution Corporation has the powers to cancel the liability of the failing bank and convert it terms. The bank deposits may be used to bail out the failing banks. The terms and nature of the deposits can be changed by the Resolution Corporation. In the proposed bill there is no mention of the amount of the depositors to be insured.
Due to this bill, the depositors are at the risk of losing their money or the terms of their deposits being changed without the consent of the depositor, to keep the failing bank afloat. The bill is at present before the Select Committee of the Parliament. Unless the provisions of the bill are changed, the depositors will be a worried lot with their deposits at risk.