Clauses in FRDI Bill to protect depositors’ interests, says govt

NEW DELHI: Defending the provisions of the Financial Resolution and Deposit Insurance (FRDI) Bill, the government on Thursday said the clauses in the bill are aimed at protecting the interests of depositors.

“The provisions contained in the FRDI Bill, as introduced in the Parliament, do not modify present protections to the depositors adversely at all. They provide additional protections to the depositors in a more transparent manner,” the finance ministry said in a statement. “The FRDI Bill will strengthen the system by adding a comprehensive resolution regime that will help ensure that, in the rare event of failure of a financial service provider, there is a system of quick, orderly and efficient resolution in favour of depositors,” it added.

The bill has been criticised for some of its provisions including a ‘bail-in’ clause which suggests that depositor money could be used by failing financial institutions to stay afloat.

“The FRDI Bill is far more depositor-friendly than many other jurisdictions, which provide for statutory bail-in, where consent of creditors/depositors is not required for bail-in,” the government said.

The government added that it is protecting the rights of even uninsured depositors.

“Besides providing similar protection/guarantee of ₹1 lakh to depositors, as it exists today, the rights of uninsured depositors are being placed at an elevated status in the FRDI Bill compared to the existing legal arrangements over the unsecured creditors and even government dues,” the statement said.

The FRDI Bill 2017 was tabled in the Lok Sabha in August, and then referred to the joint parliamentary committee. The panel will submit its report in the winter session of Parliament beginning December 15.

The bill aims to limit the fallout of the failure of institutions such as banks.