The controversial Financial Resolution and Deposit Insurance (FRDI) Bill, which was officially listed for the Winter Session of the Parliament, may not be introduced in Parliament even during the Budget Session as the Parliamentary Standing Committee gets an extension to submitting its report “up to the last day of Budget Session, 2018”. Lok Sabha Speaker Sumitra Mahajan informed the House that extension of time has been granted for the joint panel on the FRDI Bill “up to the last day of Budget Session, 2018”.
The committee on the FRDI Bill decided to seek extension as they were not ready for a presentation by December 15 — the first day of the ongoing Winter Session. The Union Cabinet chaired by Prime Minister Narendra had approved the proposal to introduce FRDI Bill in June this year. The bill was tabled in Lok Sabha in the monsoon session.
The FRDI Bill establishes a Resolution Corporation to monitor financial firms, anticipate the risk of failure, take corrective action, and resolve them in case of such failure. The bill created controversy over its ‘bail-in’ clause, which allowed critically ill banks to restructure their liabilities, which are also depositors’ monies.
The clause is being opposed by many sections of society, as it is understood to be putting depositors’ money in danger. So far thousands of people have petitioned against it online even as the government, on several occasions, assured the public that the bill was depositor friendly and provided more protection.
What the bail-in clause is
A bail-in is rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. A bail-in is an opposite of bail-out, in which, the banks instead of saving bankrupt companies, save themselves. So, the FRDI bill, if passed in the Winter Session scheduled to commence on December 15, will allow critically ill banks to restructure their liabilities, which are also depositors’ monies. Restructuring of liabilities means that they can take your deposited cash and issue bonds, shares etc, which can be redeemed only after a fixed period of time.