New Delhi: Industry body ASSOCHAM urged the government to remove a clause from the bill that seeks to treat depositors as other creditors and shareholders for bail-in.
The request by ASSOCHAM came a day after Prime Minister Narendra Modi said that rumours are being spread about the Financial Resolution and Deposit Insurance (FRDI) Bill, even as long queues of the people were seen in some parts of the country to withdraw deposits from banks.
The industry body also demanded that the government's assurance that depositors' interest, in case of bankruptcy would be fully protected, should be clearly and unambiguously spelt out in the Financial Resolution and Deposit Insurance (FRDI).
ASSOCHAM said that the panic among the bank depositors is largely because of "bail-in" provisions in the FRDI Bill, something being tried for the first time in Indian financial markets.
“The intention seems to be that it should not always be the government which should take a hit for a bail- out of a bank in trouble; and let the shareholders and other stakeholders, which include even the depositors (above the limit of insured amount) be responsible for saving a financial entity”, the ASSOCHAM said in a statement.
The ASSOCHAM Secretary General D.S. Rawat said in the Indian context, the concept of ''bail in '' especially by depositors should be completely done away with and their monies in the banks have to be protected at any cost.
"Otherwise, the trust in the banking system runs the risk of being eroded and the savings by the households would find way into unproductive avenues like real estate, gold, jewellery and even in the unorganised and informal financial markets run by unscrupulous people".
Prime Minister Modi while addressing the Annual General Meeting (AGM) of FICCI on Wednesday, said that rumours are being spread about the Financial Regulation and Deposit Insurance (FRDI) Bill.
He said the government is working to protect the interests of the account holders, but rumours that are being spread are the exact opposite.
The Prime Minister's appeal came after crores of rupees were withdrawn from various banks. Bank managers made futile efforts to pacify people. They even requesed the customers to wait till FRDI bill is passed in the Parliament. However they failed to give an assurance that the proposed bill will protect the interests of the customers.
The FRDI Bill is part of a larger, more comprehensive approach by the Centre towards systematic resolution of all financial firms — banks, insurance companies and other financial intermediaries. The Bill comes together with the Insolvency and Bankruptcy Code to spell out the procedure for the winding up or revival of an ailing company.
The need for a specific regulation rose following the 2008 financial crisis, which witnessed a large number of high-profile bankruptcies. With the Centre also actively encouraging people to engage more with the banking sector — both through schemes like Jan Dhan Yojana and moves like demonetisation — it becomes critical to protect savers and those joining the formal economy in case a bank or insurance firm starts failing.
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