Online plea against FRDI Bill spreads like wildfire; 40,000 signatures and counting

An online petition, which was started by a Mumbai-based Shilpa Shree, against the proposed FRDI Bill has got more than 40,000 signatures in just 24 hours. The petition, filed on change.org, calls for support against the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017. There's an ongoing debate on a particular clause in the bill, which apparently would allow the banks to use depositors' money to bail themselves out in case they face bankruptcy. "This bill gives power to a government entity to use depositors' money to save a bank on the verge of bankruptcy," the petition said.

Finance Minister Arun Jaitley on Thursday junked reports on diluting the proposed FRDI Bill that deals with insolvency of financial service providers. He assured that contrary to claims by Opposition parties, the government was committed to protect the rights of depositors. However, the centre has received flak from several quarters over the inclusion of some provisions in the bill that might hurt the prospects of small depositors. The Financial Resolution and Deposit Insurance Bill, 2017, was presented in the Lok Sabha in August before it was referred to a Joint Committee of Parliament.
As per the bill, Resolution Corporation has the power to cancel liability of a failing financial institution. An oversight body, the Resolution Corporation, however, can keep a track on failing banks, or provide measures to minimise the impact of these failing institutions on the entire financial sector. Many political parties have said the bill is anti-poor, and is introduced to just minimise the losses of failing financial institutions. They said the law would put common people's money in jeopardy.

"The Financial Resolution and Deposit Insurance Bill, 2017 is pending before the Standing Committee. The objective of the government is to fully protect the interest of the financial institutions and depositors," Jaitley tweeted.

Meanwhile, Mamta Pathania, co-project director at National Consumer Helpline and faculty member at the Indian Institute of Public Administration, said in a report in the Mint that "the provisions of the bill have been creating a lot of confusion in the minds of the people. Ultimately, bank deposits are considered the safest investment option by any investor."

What is FRDI Bill
The bill minimises the failure of financial as well as non-financial institutions like banks, insurance companies and stock exchanges by providing measures like 'bail-in' option to revive them. The ministry of finance said the FRDI Bill is far more depositor-friendly than many other jurisdictions, which provide for statutory bail-in, where consent of creditors/depositors is not required for bail-in. The FRDI Bill does not propose in any way to limit the scope of powers for the government to extend financing and resolution support to banks, including Public Sector Banks, it said, adding that the government's implicit guarantee for Public Sector Banks remains unaffected.

"Indian banks have adequate capital and are also under prudent regulation and supervision to ensure safety and soundness, as well as systemic stability. The existing laws ensure the integrity, security and safety of the banking system. In India, all possible steps and policy measures are taken to prevent the failure of banks and protection of interests of depositors (e.g. issue of directions / prompt corrective action measures, capital adequacy and prudential norms). The FRDI Bill will strengthen the system by adding a comprehensive resolution regime that will help ensure that, in the rare event of failure of a financial service provider, there is a system of quick, orderly and efficient resolution in favour of depositors," the ministry of finance said in a statement.