The Ministry of Finance on Tuesday dismissed reports regarding depositor protection in the context of "bail-in" provisions of the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, and assured that the interests of depositors (both insured and uninsured) would be protected.
"Certain misgivings have been expressed in the media, especially social media, regarding the depositor protection in the context of "bail-in" provisions of the FRDI Bill. These misgivings are entirely misplaced," the ministry tweeted.
The ministry further reiterated the government's commitment to cater to the capital needs of the public sector banks.
The ministry noted that the bail-in provisions would not be used in case of a public sector bank; hence, a contingency was not likely to arise.
"Bail-in amounts to liabilities' holders bearing a part of the cost of resolution by a reduction in their claims. It is only one of many resolution tools in the FRDI Bill; others are acquisition, merger, and bridge service provider, and are to be used either singly or in combination with other tools. Bail in provision may not be required to be used in case of any specific resolution," it noted.
With regards to the FRDI Bill, the ministry clarified that it was expected to replace the existing resolution regime with a more comprehensive one, thereby creating a more robust system of looking into depositors' resolutions.
"Financial Resolution and Deposit Insurance Bill, 2017 seeks to protect and enhance depositors' existing rights and bring in a comprehensive and efficient resolution regime for financial firms. It does not modify present protections to the depositors adversely at all. It provides only additional protections to the depositors in a more transparent manner," it noted.
On a related note, the FRDI bill was introduced in the Lok Sabha on August 10, 2017, and is presently under the consideration of the Joint Committee of the Parliament. The Joint Committee is consulting all the stakeholders on the provisions of the Bill.