Financial Resolution and Deposit Insurance Bill 2017 similar to the Insolvency and Bankruptcy Code, 2016 resolves around creating a comprehensive framework for faster and cost-effective resolution of distressed financial entities. The bill was introduced in the Lok Sabha in August this year and deals with all the issues that can come forth in case financial institutions including bank, insurance companies, NBFCs and exchanges go bankrupt.

FRDI Bill, 2017- Highlights

FRDI Bill aims at protecting customers of financial service providers in financial distress. Adequate preventive measures shall be put in place to ensure financial stability of the economy as well as all crucial instruments will be provided to mitigate with any such crisis situation.

Also, through the bill, bail out using public money shall be restricted or limited and discipline shall be inculcated in this respect among financial service providers.
The existing framework of deposit insurance shall be strengthened and made effective to benefit retail depositors. On enactment and passage of the bill, a resolution corporation shall be established to strengthen the stability of financial sector entities.

'Bail-in' Clause Caused Worry Among Bank Depositors

The industry chamber body Assocham yesterday asked to do away with the 'bail in' provision from the proposed FRDI bill citing it as the prime reason for worry among bank depositors. To this effect, Prime Minister Modi said the government is working to safeguard the interest of customers and their deposits with bank.

The draft bill will prevent financial institutions from going bankrupt by writing down liabilities through a Resolution Corporation that is being taken by some as a 'bail in' which in a nutshell implies that depositors have no superior claims with respect to their deposits.

Through its bail-in clause, the proposed bill hints that it should not always be the government that should come up with the bail-out plan for the bank in financial trouble and instead let the shareholders and other stakeholders that include depositors take over the responsibility of saving the company in crisis.

The chamber said, "Now as of now, the deposits are covered only up to Rs one lakh, which is a measly sum for millions of middle class families which have kept their life time savings in bank deposits".

Today, the bill has been deferred and the joint parliamentary committee that is scrutinizing the law will now present it during the Budget session.

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