RESERVE BANK GOES BACK ON ITS OPPOSITION TO FRDI BILL

NEWDELHI: Reserve Bank of India governor Urjit Patel told a House panel on Monday that the country’s central bank is “not opposed to” the Financial Resolution and Deposit Insurance (FRDI) Bill, three months after it first expressed concern over several provisions of the legislation that envisages the creation of a new regulator whose responsibilities could overlap with those of the central bank.

Patel also supported the guarantee of ~1 lakh to depositors under the bail-in provision and wanted to retain the public sector banks under the purview of the bill.

Finance minister Arun Jaitley told Rajya Sabha in January this year that the government is open to suggestions for hike in the limit of ~1 lakh. “At the moment, security is up to ~1 lakh. But provisions of the bill give a flexibility and the government’s intention is also to raise this amount,” Jaitley told Rajya Sabha.

“We are waiting for the recommendations of the Standing Committee. I am open to consider the suggestions in this regard,” he added.

At the meeting of the joint committee of the Parliament on the bill, Patel read out a statement to spell out RBI’s stand on the contentious FRDI bill, according to three members of the House panel who asked not to be identified.

The RBI governor’s stand may take the wind out of the Opposition’s revolt against the FRDI bill.

Patel maintained that the central bank is “not opposed to FRDI bill” but added that it only wants more clarity “on how the regulator (RBI) and the proposed Resolution Corporation (RC) would work simultaneously”, according to the three members of the House panel.

RBI, Patel said, also doesn’t want the protected amount in case of insolvency or resolution to go beyond ~1 lakh for depositors under the controversial Bail-in provision.

When Biju Janata Dal MP Bhartruhari Mahtab asked if the RBI wants this amount to be increased to protect customer interest, Patel said that this limit is fine with the RBI as 91% of the customers in Indian banks have deposits less than ~1 lakh in their banks accounts.

MPs Naresh Gujral of Akali Dal, Trinamool’s Saugata Ray and BJP’s Nishikant Dubey quizzed Patel over his stand on several clauses including the inclusion of state-owned banks under the purview of the proposed law.

Patel, according to the three MPs mentioned in the first instance, supported the inclusion of state-owned banks in the law. He underlined that in case of insolvency of any state-owned bank, the Parliament of India would take the final call because these banks have been constituted by an act of parliament.

The RBI governor, according to MPs present in the meeting, suggested that the regulators such as RBI or the Insurance Regulatory Development Authority should be given the opportunity to categorize the stage of crisis and they will inform the RC for appropriate action.

Ray and a few other MPs accused Patel of changing his position, according to the three members of the House panel, but Patel, they claim, rejected the charge.