The government has decided to withdraw FRDI Bill following apprehensions expressed by public with regard to the ‘bail-in’ clause to resolve a failing bank and insurance cover on bank deposits, Finance Minister Piyush Goyal told a parliamentary committee. The Financial Resolution and Deposit Insurance Bill (FRDI Bill) was introduced in the Lok Sabha on August 10 last year, and thereafter, it was referred to a joint committee of Parliament for scrutiny.
“The stakeholders including public have raised apprehensions relating to the provisions of the FRDI Bill, like the use of bail-in instrument to resolve a failing bank, the adequacy of deposit insurance cover and the felt need to revive the insurance limits substantially, and application of resolution framework for public sector banks. “Resolution of these issues would require a comprehensive examination and reconsideration. It is, therefore, appropriate that the bill may be withdrawn,” Goyal had informed the joint committee, which tabled its report on the controversial bill today in Parliament.
The committee, headed by Bhupender Yadav, agreed with the proposal of the government to withdraw the bill. The FRDI Bill sought to make an enabling law for creation of an independent Resolution Corporation to carry out speedy and efficient resolution of financial firms in distress, providing deposit insurance to consumers of certain categories, monitoring of the systemically important financial institutions and protecting the consumers to the extent possible.
The bill created lot of controversies as some experts felt that the ‘bail-in’ clause had the potential to harm deposits in savings bank accounts. As per the report, the committee sought views of several stakeholders, including the RBI and industry bodies. While briefing the panel, RBI Governor Urjit Patel had expressed concerns with regard various provision of the bill related to criteria for risk classification, information sharing between regulators and Resolution Corporation, among others.