1. Fact Check FRDI Bill: Will you lose money if banks go bust? Is criticism of proposed law political propaganda?

Fact Check FRDI Bill: Will you lose money if banks go bust? Is criticism of proposed law political propaganda?

FRDI Bill: A number of posts doing the rounds on social media these days claim depositors may lose their money in banks if this law comes into force.

By: | Updated: December 12, 2017 3:30 PM
frdi bill, frdi bill fack check, frdi bill row, frdi bill controversy, frdi bill detail, frdi bill fact,. arun jaitley, congress Union Finance Minister Arun Jaitley addresses the media in New Delhi on Monday. PTI Photo by

FRDI Bill: A number of posts doing the rounds on social media these days claim depositors may lose their money in banks if the Financial Resolution and Deposit Insurance Bill, 2017 comes into force. Some critics of Modi government has even termed the FRDI Bill as something that may unleash Prime Minister’s second demonetisation, which had made old Rs 500 and Rs 1000 currency notes illegal on November 8, 2016. Should you panic? No, says the government and advises not to fall to political propaganda.

The Bill is currently being examined by a Joint Committee of the two Houses of Parliament. It aims to set up a ‘Resolution Corporation’ which will monitor the risk faced by financial institutions like banks and insurance companies and also resolve them in case of failure. Some provisions of the Bill allow for ‘Bail-in’ or cancellation or writing down of liabilities of a financial firm. It was claimed by many opposition and commentators that the bail-in will put depositors in an unfavourable position if the bank fails.

What the Centre says

The Ministry of Finance has advised people to “beware of fake propaganda, beware of fear mongering against banks to keep people away from banking services. In a Twitter post, the ministry said, “Government of India assures the security of the money deposited in the banks. The government of India is strengthening rights of depositors like never before, special care being taken of small depositors.”

“Government of India is strengthening the mechanism to protect depositors. Proposed FRDI Bill is presently before joint committee and the act in this regard is yet to be passed. Rights of depositors will be fully protected at the time of legislation. Banks being strengthened by the infusion of over Rs 2 lakh crore.”

On Monday, Union Finance Minister Arun Jaitley said the government will fully protect public deposits in financial institutions. He also hinted at openness to changes in the proposed FRDI Bill. According to Jaitley, government’s Rs 2.11 lakh crore capital infusion plan will strengthen banks and there is no question of any lender failing. However, the FM said, in case a bank fails, the government will “fully protect” the deposits made by customers and the “the government is very clear about it”.

The FRDI Bill, 2017 was first introduced in the Lok Sabha in August this year.

Jaitley said rumours are being spread about the provisions of the bill. “The government has already clarified and said it is committed to strengthening PSU banks and financial institutions. About Rs 2.11 lakh crore is being pumped in to strengthen the public sector banks.”

What Congress says on FRDI BILL

Congress party says, “Like Demonetisation, this is yet another anti-people move by the Narendra Modi government.” However, the Bill is yet to pass the Parliamentary scrutiny. An article on Congress official website (Inc.in) makes following claims that may scare saving bank account holders:

  • “Faced with the gargantuan challenge of resolving the issue of burgeoning Non-Performing Assets (NPAs) of Public Sector Banks (PSBs), the Narendra Modi government is aiming to introduce Cyprus-style ‘bail-in’ clause, which essentially puts the onus of bad lending decisions made by a bank on the depositors.
  • “FRDI Bill has a sneaky ‘bail-in’ clause, the purpose of which is to absorb the bank’s losses and to aid its survival.
  • “If approved, the FRDI Act will empower the Resolution Corporation to cancel a bank’s liability or alter it to another security.
    Savings or fixed deposits come with a “promise that the bank shall return the money on demand…However, with ‘bail-ins’, the banks would be empowered to simply refuse the repayment of the customer’s hard-earned money, or in some cases, issue securities like preference shares, in lieu of the money. These deposits would then be used for the recapitalisation of the ailing bank.
  • “The only money that would be safe from this sneaky clause in the amount covered by deposit insurance. However, the draft bill also vests enough power in the Resolution Corporation to take a call on the amount insured for each depositor.
  • “Banking, as we know it, is set to change if the government has its way. Depositing money in a bank would no longer be considered safe, given the fact that access to it in an emergency will not be guaranteed. Fundamentally, the relationship between banks and customers will undergo a sea change. Customers will have to exercise the same kind of due diligence before depositing money, as is natural when investing in mutual funds or when buying the shares of a company.
  • “The customer will have to deal with the additional burden of constantly monitoring the financial health of his bank, and perennially switching bank accounts. In a country where large sections of people are still unbanked and are being newly introduced to the banking system, such kind of financial intelligence can hardly be expected.
  • “While corporate honchos will get away, it is the customer who will be coerced to part with his savings…If this bill gets the nod, it is the poor, and the weakest sections of society that will be hit the hardest.”

Should you really worry?

FRDI Bill 2017 is still a proposed legislation. Hence, there is no need to worry as of now.  The government has promised to consider the recommendation of Joint Parliamentary Committee of both Houses of Parliament and also to ensure that depositors’ interests are not compromised.

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  1. Krishnamurthy Raju
    Feb 17, 2018 at 3:26 am
    More frauds can happen,
    1. T
      Dec 13, 2017 at 10:42 pm
      FRDI Bill coming on the heels badly executed demob, GST and Aadhar linking fiasco has made common man jittery and scared of losing his life's savings because men in powerful positions brokered loan deals for their supporters who had no intentions of repayment. Now this very same powerful men want to compensate the banks' loss from the deposits made by common man. North Korea can take a few lessons from India. This bill will surely scare the depositers away from banks. May be that is what the intention is because deposits at old rates and no credit off take must be pushing the balance creditor of banks southwards. Who knows, may be this is a way to force savings into stock-market which is easy to manipulate.
      1. Bloggervat Bloggervat
        Dec 13, 2017 at 10:43 am
        When a 3rd grade cheat like Ambani owes us 3L cr, why is Modi and Jaitley so worried in bailing that asolse when his son is giving wedding invitations worth Rs.1500 each?
        1. Mahesh Desai
          Dec 13, 2017 at 9:43 am
          there is absence of any social security programmes/plan/measures for persons- from birth,food,education,health,employment, retirement, senior citizen,very senior citizen,ladies, unmarried, divorces,widows, deserted by children our country,most of persons are in unorganised sector,(except lucky few-elected members,government employees),persons in interior villages. Gov.backed banks assurred peopl of safty. The insurance covered bank balances limit has been Rs. 1 lac since or before 1990.Despite mismanagement inflation (even considering Gvernment's Cost Inflation Index or Increaed renumertion of elected members, Hon. Judiciary Gov. Pay commoission) no futherance of gaurrenttee has been implemented despite request from concerned citizen.Gov. may,can,must pass laws to control ins utes,their officers to be professional not squandere away ,middle class peoples savings(by denying worldly pleasues in prime of health,age , in gujarati vernacular "PETE PATA BANDHINE" saved for old age
          1. S
            Dec 12, 2017 at 11:10 pm
            Hard earned poor man's money is at risk. This move needs to be fought tooth and nail. This reminds us the way people were depositing money in chits funds and one fine day shutters are closed. Many persons lost their entire life savings. Banks are surviving on Government assurance. All banks are in doldrums, except few. Common man will lose faith in GOVT. and this move will trigger heavy loss to public at large and many people will lose jobs similar to demonetization. Instead of creating more jobs, the govt is demolishing all ins utions.
            1. L
              Dec 12, 2017 at 6:11 pm
              Banking is a trust.we keep our savings in a bank so that we can withdraw when ever in need.If after depositting we dont know whether we will get our money when needed then the entire system looses its purpose.I expect our Government to make such rules and regulations so that the public does not loose their faith and confidence of the banking system and of the government.There is no room to dilute the confidence.If the banks and financial ins utions fail,then the responsibility lies fully on the bank directors and staff.The amount of insurance is also very low as the same was fixed when one lac had lot of value,while in todays time it has to be atleast 25 lacs.
              1. A
                Dec 12, 2017 at 5:08 pm
                We are going back to the household rules from 20 years back....keep only money in bank which is insured....and for the rest get a good iron locker or tijori at home.....ohh no i live in flat need to get society permission to get the locker fixed in wall
                1. C
                  Dec 12, 2017 at 4:29 pm
                  Demonetization has hit the banks hard and their outlook looks uncertain. The government is trying to squirm itself out of the blame game. Why is the government not offering itself to be a guarantor?The fact is that the government has stolen depositors money in the demonetization process. This regime are a pack of professional liars as we have seen Modi in full flow in his Gujarat campaign. A BJP loss in Gujarat will be good for India.
                  1. S
                    Dec 12, 2017 at 4:25 pm
                    As long as Depositor's interest is not compromised and he/she is fully safe in case bank defaults, then should not to worry. But in case of Bank defaults and customer's to be penalized then it is historic change in favor of ins utions whereas customer's should be protected in any given scenario. Why people have to put their Indian banks rather will go for options and money will flow out of country keeping in mind.
                    1. D
                      Dec 12, 2017 at 4:16 pm
                      Oh My God what is happening
                      1. J
                        Dec 12, 2017 at 3:55 pm
                        If they are going to protect the depositor money then why bringing this bill in the first place they can do it anyways by pumping money to banking sector like they always do.But now they want to divide the bank losses with us depositors.Not a single welfare scheme neither any old age medical support and even so less deposit interest rate. How can they even expect this out of us? Now after all this there is no doubt in it that BJP is totally an anti-people govt .The only thing they are good at is duping us.
                        1. A
                          A R Chaudhuri
                          Dec 12, 2017 at 3:46 pm
                          FRDI is a very weird move. This brings the common depositors unfathomable risk. Why a depositor should be penalized due to bad management of the bank which leads to NPAs and eventually may lead to a position of bank's bankruptcy? The thought concept is itself goes against the basic ideas of democracy. This might be the worst decision so far of any government in this country.
                          1. Gopalakrishnan Kuzhuppilly
                            Dec 12, 2017 at 3:42 pm
                            The promises of any government -Centre or State should not be accepted on face value. The soverign promise has no value. This started with the deletion of the words "promise to" from the pledge printed on the currency notes and continued with the abolition of privypurses and still continues with the arbitrary amendments to the terms of Public Provident Fund,small savings schemes etc.The NRIs whose money sustains states like Kerala are being taken for a ride by the Centre Govt by reducing the interest on their PPF accounts even though the NRI does not avail of the IT exemption available under PPF Rules. Since the interest on PPF is no more special and attractive, the depositors should be allowed to close the accounts. The Central Govt PM and FM are finding only black money and money laundering everywhere. While they help such people ,they harass the common people by such stupid actions-reducing interest rates, linking Aadhar number etc. faulsly thinking this will help to reduce BMoney
                            1. Mani Menon
                              Dec 12, 2017 at 3:39 pm
                              Why should we believe anything that you utter, Mr Jaitley?
                              1. S
                                Dec 12, 2017 at 2:40 pm
                                If the govt is really interested in protecting bank depositors' interests why should they put this clause at all, in the bill , by putting the depositors' money at stake in the first place?
                                1. C
                                  Dec 12, 2017 at 3:29 pm
                                  There are certain rules in the fine print you ought to know. You deposit your money at your own risk. If the bank goes bust, it is legal to use your money to bail itself out. There is no obligation for the bank to get your permission. If the bank has a guarantor, they may refund as much as 5 to the rupee. It is very important to follow the financial trends in world markets. Usually, banks borrow from other foreign ins utions to give loans. In a a global market meltdown when debts payable to banks are withheld by the borrower, the bank will have to fulfil its obligation to pay back the loan with the interest. If they cannot, they can use your deposit to pay back the money. Sometimes, depositors get the smell of things and quickly withdraw their money. The bank then has the right to control the withdrawals, or close the bank. I hope I have enlightened you. Don't believe the ministers. The BJP is more dishonest than the Congress.
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