MY BIZ: Jaitley kills buzz on bank failure
Finance Minister Arun Jaitley on Monday said the government will fully protect bank deposits of the public in an attempt to allay fears over a clause in the new financial resolution and deposit insurance (FRDI) Bill that is seen by some experts as a potential danger to funds held in savings accounts.
Jaitley said the government’s massive Rs 2.11 lakh crore plan to infuse capital into public sector banks was to strengthen them and there was no question of any bank failing.
If any such situation arises, the government will fully protect the deposits made by customers. The government is very clear about it, he added.
Finance Minister Arun Jaitley on Monday said the government will fully protect bank deposits of the public
Jaitley made the comment to allay concerns over the bail-in clause in the FRDI Bill, 2017, first introduced in the Lok Sabha in August this year and currently undergoing scrutiny by a joint parliamentary committee.
The so-called bail-in clause in the draft legislation has been commented upon by experts as being potentially harmful to deposits held in savings accounts.
A bail-in is a way to rescue an ailing bank or a financial institution by making its creditors and depositors take a loss on their holdings.
The finance minister’s statement comes in the backdrop of fears that the provisions in the Bill could get extended to bank deposits.
Jaitley said rumours are being spread about the provisions of the bill.
The government has already clarified and said it is committed to strengthen publci sector banks and financial institutions.
About Rs 2.11 lakh crore is being pumped in to strengthen the public sector banks.
The FRDI Bill proposes to create a framework for overseeing financial institutions such as banks, insurance companies, non-banking financial services (NBFC) companies and stock exchanges in case of insolvency.
The ‘Resolution Corporation’, proposed in the draft bill, would look after the process and prevent banks from going bankrupt. It would do this by writing down of the liabilities, a phrase some have interpreted as a bail-in.
The draft bill empowers Resolution Corporation to cancel the liability of a failing bank or convert the nature of the liability.