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Is your money safe in bank? No relief likely for customers in case bank fails

Is your money safe in bank? No relief likely for customers in case bank fails
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New Delhi: People trust banks and deposit their hard earned money either for using it later at an old age or for the purpose of educating their children or performing marriages.

All the bank depositor will now get a shock when they hear that their money is not going to be safe. Govt. of India has introduced a bill which may take away the power of the depositor over their money. Some of its clauses are worrying financial experts. Although, Govt. is making an attempt to remove apprehensions of the people about this bill the clauses likely to be included in the bill are worrying the people.

This bill envisages that in case a bank is declared bankrupt, the depositors may lose their money. There is no such thing called bank guarantee. Govt. of India is going to abandon the corporation system which was introduced in 1961 during Nehru Govt. At that time, Govt. had promulgated Deposit Insurance and Credit Guarantee Corporation under which depositors were assured to get some money in case a bank is declared bankrupt.

The present Govt. introduced Financial Resolution and Deposit Insurance Bill which gives powers to this institutions and the depositor may not have any control over their money whereas the bank can use money according to its policies. Under this bill, the bank gets power to use depositors’ money for 20 years which means the depositors cannot get their money whenever they need. The bank also will not have any liability to fulfill any of the guarantees given by it to the depositors.

If any depositor deposits Rs. 15 lakhs in his saving bank account, the bank may convert any amount into fix deposit account. This step is being taken by the Govt. in order to save the banks from bankruptcy. This bill is increasing public wrath and criticism.

Reacting on this issue, Finance Minister, Mr. Arun Jaitley on Thursday said the proposed FRDI Bill protects the rights of depositors, denying reports to the contrary.

“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,” Mr. Jaitley said in a tweet. The government stands committed to this objective, he added.

According to Economic Affairs Secretary S.C. Garg, the FRDI Bill proposes to protect existing rights of the depositors. “There is no dilution thereof. Instead, it enhances present protections in certain ways. Principal guarantee for PSU Banks’ depositors come from government ownership which also remains completely unaffected,” Mr. Garg said.

The government tabled the Financial Resolution and Deposit Insurance Bill, 2017 in August in the Lok Sabha, which was referred to a Joint Committee of Parliament. The Bill seeks to deal with the insolvency of financial service providers.

In a statement released to the press, the Finance Ministry has clarified the existing provisions of deposit protection guarantee will be maintained in the proposed FRDI Bill as well.
“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. Government’s implicit guarantee for public sector banks remains unaffected,” the statement read.