The Congress and the CPM have red-flagged Section 52 of the Financial Resolution and Deposit Insurance (FRDI) Bill, likely to be tabled and passed in the Winter Session of Parliament, which will commence on December 15. The proposed law is part of government efforts to recapitalise banks to overcome the NPA (non-productive advances) crisis. It seeks to empower the banks and the financial institutions to write off part of their depositors’ money to help them from going bust.According to the RBI’s Financial Stability Report released in June 2017, the gross NPAs or bad loans to total deposits ratio of all banks stood at 9.6% in March 2017. The government-owned banks, however, currently have an even higher bad loans ratio of 13.69%.Nilotpal Basu, former MP and CPM central committee member, said: “The Modi government seems to be surreptitiously sneaking in a measure to institute ‘hair-cuts’ on depositors’ money in a manner that is similar to what we have seen in Greece, Cyprus and other European countries which have gone through an economic crisis.” A note posted by the Congress on Thursday also stated: “If the draft bill gets the nod of Parliament, it will empower the Resolution Corporation to cancel a bank’s liability or alter it to another security.”The opposition parties are also concerned over the fate of an insurance cover of Rs 1 lakh by the Deposit Insurance and Credit Guarantee Corporation since 1961 on all deposits of the individuals parked in savings or current bank accounts or held as fixed deposits, irrespective of how much is parked in these accounts.The Opposition is gearing up to stall the proposed law in the Upper House with full force and force amendments to provide a security to the money of depositors. Until now it was mandatory for banks to pay a sum to the DICGC as insurance premium. Though the Bill proposes the banks to pay a sum to the Resolution Corporation, it neither specifies the insured amount nor the amount a depositor would be paid. It is thus unclear how much a depositor would be paid in case of liquidation. While admitting that the provisions of the Bill do ensure resolution of issues in time-bound manner, Opposition leaders said the ambiguities on how the depositors would be repaid need to be addressed before it is table on the floor of Parliament.
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Yogi Adityanath


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Govt, Oppn brace up for showdown on FRDI Bill