FRDI Bill: CPI wants Centre to ensure safety & security of bank deposits

FRDI Bill: CPI wants Centre to ensure safety & security of bank deposits

The Communist Party of India has expressed its shock to know that Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill) is likely to be tabled in winter session of Parliament and if adopted it will take away the depositors’ money in the banks in order to bail out the banks hit by huge corporate defaults.

In a press release issued here on Tuesday, CPI general secretary S Sudhakar Reddy stated the FRDI Bill, which seeks to create a framework for resolving bankruptcy in banks, insurance companies and other financial establishments, proposes to establish a ‘Resolution Corporation’ to monitor financial firms, calculate stress and take & “corrective actions” in case of a failure. The Bill empowers the corporation to take corrective actions such as merger or acquisition, transferring the assets, liabilities to another firm or liquidation, he added.

The CPI leader said India never had such a resolution authority before. The Reserve Bank and the IRDAI are handling these functions for the banking and insurance sectors. The RBI, in the past, had asked PSU banks to take over stressed banks in order to protect the depositors and employees. The proposed Bill seeks closure of the Deposit Insurance and Credit Guarantee Corporation (DICGC), an RBI subsidiary, as the credit guarantee will be taken care of by the Resolution Corporation itself, he said.

“The Corporation shall, in consultation with the appropriate regulator, specify the total amount payable by the Corporation with respect to any one depositor, as to his deposit insured under this Act, in the same capacity and in the same right”, the draft Bill states. “Until now, it was mandatory for banks to pay a sum to the DICGC as insurance premium. Though the Bill proposes the banks to pay a sum to the Resolution Corporation, it neither specifies the insured amount nor the amount that will be paid to the depositor. After the demonetization and GST, the present move will eat away whatever hard-earned money the people have in the banks. Therefore, the CPI urges the Narendra Modi government to desist from such acts. Instead, the government must ensure the safety and security of the savings of all depositors, Sudhakar Reddy added. (NSS)

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