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  • Category: Miscellaneous

    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.
  • #618351
    Yes. This discussion is going to many places. Many of the depositors are of the understanding that there is a threat to their deposits in case of insolvency. The provisions of this bill talk about the stability of the financial sector. It is also talking about solving the issues in a time bound way. But there is an ambiguity on how the depositors would be repaid. Still, this point is not clear. It is to be addressed further. Otherwise, there may be a threat to the people who are keeping their hard earned money in these banks to care of their livelihoods after their retirement.
    I feel this bill will not be through as it is and the position of the depositors and their confidence of keeping the money in the banks will be taken care. Let us hope that the government will take care of this problem. However, the bank employees are also not favouring this bill and recently they have gone a one-day strike opposing the same.

    drrao
    always confident

  • #618386
    This sounds scary. It's like what some companies do after floating an IPO. Once the money is collected, they would pay off the debts and the share prices keeping going down steadily. In the process, many shareholder lose their money. The new regulations for the deposits sounds even worse. The depositor would have faith in a public sector bank and it is like have faith in the government and putting in our money for a future use. I think the banks should not misuse this faith and use the depositors hard earned money to pay off their NPAs and then the poor customer has to bear the loss of interest or part deposit. I don't think many would agree, if passed, people would withdraw all their deposits and keep cash in hand. People would be struggling to understand why in the first place the NPA was allowed to grow? why should individual depositors take the risk of losing their money. Let's wait and see.

  • #618402
    I have received the information in whats app. It is really a scary matter. We have to be concerned about it. Especially the way it is being pushed.

    This has not received the attention and opposition it deserves from the enlightened political parties and trade unions. The matter is now taken and debated, with whatever preliminary information available, among concerned employees and former employees.
    I am sure if the general public comes to know the full ramifications of this, then there will be real huge protests. No one will be ready to deposit money with banks. This will be another free facility to'bail out and free the defaulters of bank borrowings.

    It is another ploy to kill public sector banks and allow people's savings to flow to other market,where there is no guarantee on returns and innocent people may be under the mercy of giant financial sharks and manipulators. As our financial sector is getting opened to foreign investors, it is anybody's guess.

    Let us recall why the banks were nationalised, what was the situation before nationalisation, what is the progress and development and spread of banking awareness after nationalisation.

    It will not be the corporate and multinationals who will be affected,but the small and middle class ,household saving depositors who will be affected. The corporate usually borrow. As per this bill and as per our experience, big borrowal defaulters get shielded and escape easily. It is for their default poor people have to suffer.

    Even now if the government has the will and makes nationalised banks to function as commercial entities and free them from unnecessary interference and free them from the umpteen compulsory government functions and schemes, the public sector banks will make better profit and fund back the government.

  • #618403
    Ministry of Finance has clarified that the FRDI Bill, under consideration of a joint parliamentary committee, is depositor-friendly and provides more protection to the depositors compared to the existing provisions.

    This statement has been issued in the wake of certain misgivings which appeared in a section of the media about bail-in provisions of the FRDI Bill.

    Caution: Explosive. Handle with care.

  • #618420
    The so-called misgivings which appeared in a section of the media are as per the draft of the FRDI Bill that was introduced in the Lok Sabha during the Monsoon Session of 2017. It is now being examined by the Joint Committee of both the houses. There are a good number of petitions sent to the Finance Minister in this regard. Because of these actions only, the Finance Minister issued a clarification. There will always be a fear in the minds of the people regarding the action to be taken the Government.
    " Be Good and Do Good "

  • #618429
    In such kind of bill, when it gets passed finally it will be a compromise version of the ruling party and opposition. Only pressure groups can get some changes incorporated. As far as I know about the stand of the present ruling party and the main opposition,I do not see much reason for any major changes to happen. There can be some underground trade of to safeguard their political or financial interests. This is what we see usually in such matters. Whatever has come initially may be a'testing the waters' tactic. Now that there is not much strong opposition, the bill will easily go through as per the will of the ruling party/coalition.

    Based on their stand till now, I do not expect any depositor friendly measures. Even if some thing is incorporated for namesake, there will be many fine clauses which may render it practically unfriendly. May be I am over fearing.


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