Centre is withdrawing controversial FRDI Bill, confirms select parliamentary panel member: Report
One of the reasons for reconsidering the bill is a controversial ‘bail-in’ clause, which had led to panic cash withdrawals from banks.
Union Minister of Finance Piyush Goyal has told a Joint Committee of Parliament that the government intends to withdraw the Financial Resolution and Deposit Insurance Bill, following severe opposition to several provisions in it, The Indian Express reported on Tuesday. Goyal is handling the ministry while Arun Jaitley recovers from a kidney transplant.
“Stakeholders, including public, have raised apprehensions relating to provisions of the FRDI Bill like the use of bail-in instrument to resolve failing banks, the adequacy of deposit insurance cover and the felt need to revise insurance limit substantially and application of resolution framework for public sector banks,” Goyal told the Parliament committee’s chairman, Rajya Sabha MP Bhupendra Yadav, in the motion dated July 20.
Resolving these concerns would take a lot of time, Goyal said, adding that the bill will have to be re-examined.
The controversial “bail-in” clause of the bill said that in case of insolvency in a bank, the depositors will have to bear a part of the cost of the resolution by reducing their claims. This has reportedly resulted in panic cash withdrawals from banks.
Trinamool Congress MP Sukhendu Shekhar Roy, who is a member of the committee, confirmed the decision to The Indian Express. “Good sense finally seems to have prevailed on the government,” he said. “This is a victory of the people.” His party chief Mamata Banerjee was one of several political leaders who protested against the bill.
The committee will now submit a report to both Houses of Parliament recommending that the Ministry of Finance be allowed to withdraw the bill, The Hindu Business Line reported, citing unidentified officials.
Union minister Arun Jaitley had introduced the bill in Parliament during last year’s Monsoon Session. Following widespread criticism, Jaitley said in December that the bill, contrary to reports, protects the rights of depositors. “The objective of the government is to fully protect the interest of the financial institutions and the depositors,” he had tweeted. “The government stands committed to this objective.”
The government had also said that the bail-in clause would be used only with the consent of depositors, and that depositors would be given preferential treatment.
Prime Minister Narendra Modi had said at an election rally in Gujarat last year that the Congress was “spreading lies”, claiming that the bill will lead to “bankrupt banks taking away people’s hard-earned deposits”. “Do you think I will let that happen?” Modi had asked.