Controversial bail-in clause bill set to be repealed
The government is all set to repeal the controversial Financial Resolution and Deposit Insurance (FRDI) Bill 2017, which dealt with the insolvency of financial service providers, during the current Monsoon session of Parliament.
A formal decision on the issue may be taken at the Cabinet meeting scheduled for Wednesday.
The bill, introduced in August 2017 had faced rough weather for its controversial bail-in provision, a clause which empowered banks to use depositors money to offset losses if they went bankrupt.
Faced with stiff resistance, the government first referred the bill to a Joint Committee of Parliament. With the state-run banks facing large non-performing assets, there were fears among a section of middle class that their savings were unsafe in the banks.
Given the fears and negative perception around the bail-in clause, the government has decided to repeal the bill as it would be a risky proposition in the run up to a general election. The bill also proposed to continue with the 1992 amount of Rs 1 lakh as the insured deposit in a bank account, a clause that also attracted criticism due to the low value of the insured amount.
The FRDI Bill provided for the setting up of a Resolution Corporation—to replace the existing Deposit Insurance and Credit Guarantee Corporation—which will be tasked with monitoring financial firms, anticipating their risk failure, taking corrective action and resolving them in case of failure.
The corporation was also be tasked with classifying financial firms on their risk as low, moderate, material, imminent, or critical. It is to take over the management of a company once it is deemed critical.