How safe is your money in savings accounts? Arun Jaitley gives this tough FRDI Bill statement

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New Delhi | Published: December 22, 2017 10:50:46 AM

Union Finance Minister Arun Jaitley, on Thursday, assured the Lok Sabha that money of all depositors in public sector banks will be protected and there is no need to create any fear psychosis.

Arun Jaitley clarifies on FRDI Bill (Source: PTI)

Clarifying on the concerns of depositors over provisions of the proposed Financial Resolution and Deposit Insurance (FRDI) Bill, Union Finance Minister Arun Jaitley, on Thursday, assured the Lok Sabha that money of all depositors in public sector banks will be protected and there is no need to create any fear psychosis. “The government is committed to protecting every depositor in public sector banks and therefore we need not create any fear psychosis,” he said while replying to a discussion on ‘Supplementary Demand for Grants – Second Batch for 2017-18’. Jaitley said the government’s massive Rs 2.11 trillion bank recapitalisation plan was to strengthen banks and there was no question of any lender failing. “When the (FRDI) Bill comes before the joint committee, please discuss this. There is 2011 G-20 commitment when UPA was in power and that was offtake of 2008 global crisis when the Lehman Brothers collapsed,” he said.

The so-called “bail-in” clause in the draft legislation of the FRDI Bill 2017, first introduced in the Lok Sabha in August this year, has been commented upon by experts as of bringing potential harm to deposits, in the form of savings accounts. Notably, the ‘Resolution Corporation’, proposed in the draft bill, would look after the process and prevent the banks from going bankrupt. It would do this by “writing down of the liabilities”, a phrase some have interpreted as a “bail-in”. “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,” explained Jaitley. Several people, including West Bengal Chief Minister Mamata Banerjee, has written to Jaitley expressing concern about the so-called bail-in clause. The bill is currently undergoing scrutiny by a joint parliamentary committee.

“What do we do with that clause [bail-in]? The committee has wise people which will make some recommendations. We will consider that. We are open-minded. We are very clear and the level of protection the government would want would be much higher than the level which existed till today,” Jaitley said.

Currently, all deposits up to Rs1 lakh are protected under the Deposit Insurance and Credit Guarantee Corporation Act.

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