The controversial Financial Resolution and Deposit Insurance (FRDI) bill, which was introduced in the Lok Sabha in August, was deferred by the parliamentary standing committee on Friday, reported India Today. The committee was looking into the bill that aimed to provide a resolution to deal with bankruptcies in banks, insurance companies, and other financial intermediaries through a 'Resolution Corporation' and a 'Corporation Insurance Fund'. The committee scrutinising the bill will submit its report in the upcoming Budget Session.
The clamour against the proposed Financial Resolution and Deposit Insurance (FRDI) Bill had gotten louder with the All India Bank Employees Association (AIBEA), one of the biggest unions in the banking sector, announcing strike against the draft legislation. Bank depositors had also protested the 'bail-in' clause that allegedly could have brought potential harm to deposits. In the last few days, the bill created apprehension and panic amongst depositors that the government was contemplating to liquidate the banks, and that their money would be lost in case the bill was passed as a law.
As per the draft FRDI bill, the proceeds from sale of assets of a bank would have first gone to insured depositors. In the previous regime, the depositors were insured for only Rs 1 lakh irrespective of the deposit made in a bank. The new bill, however, made no mention of the maximum amount of insured deposit. Experts said there was a possibility that the government and the Reserve Bank of India (RBI) would have kept the same limit or lower. In the draft bill, the depositors stood at fifth position in the waterfall mechanism for distribution of whatever was left in a bank in case of a collapse. These deposits, which would be mostly uninsured as the maximum insured deposit in the earlier bill was only Rs 1 lakh, were under threat of not getting anything in return.