Resolution and Deposit Insurance Bill, 2017 (FRDI Bill), introduced in
the Lok Sabha on August 11, 2017, is under consideration of the Joint
Committee of the Parliament. The Joint Committee is consulting all the
stakeholders on the provisions of the FRDI Bill. Certain misgivings have
been expressed in the media regarding “bail-in” provisions of the FRDI
Bill. The provisions contained in the FRDI Bill, as introduced in the
Parliament, do not modify present protections to the depositors
adversely at all. They provide additional protections to the depositors
in a more transparent manner.
Presently, each depositor of banks can be only protected up to a limit
of Rs. 1 lakh by the guarantee of the Deposit Insurance and Credit
Guarantee Corporation (DICGC). Remaining deposits (i.e. beyond Rs. 1
lakh of deposits in a bank) do not have any deposit protection guarantee
and are treated, at par with claims of unsecured creditors as of now.
Besides providing similar protection / guarantee of Rs. 1 lakh to
depositors, as it exists today, the rights of uninsured depositors are
being placed at an elevated status in the FRDI Bill compared to the
existing legal arrangements over the unsecured creditors and even
The FRDI Bill is far more depositor friendly than many other
jurisdictions, which provide for statutory bail-in, where consent of
creditors / depositors is not required for bail-in.
The FRDI Bill does not propose in any way to limit the scope of powers
for the Government to extend financing and resolution support to banks,
including public sector banks. Government’s implicit guarantee for
public sector banks remains unaffected.
Indian Banks have adequate capital and are also under prudent regulation
and supervision to ensure safety and soundness, as well as systemic
stability. The existing laws ensure the integrity, security and safety
of the banking system. In India, all possible steps and policy measures
are taken to prevent the failure of banks and protection of interests of
depositors (e.g. issue of directions / prompt corrective action
measures, capital adequacy and prudential norms). The FRDI Bill will
strengthen the system by adding a comprehensive resolution regime that
will help ensure that, in the rare event of failure of a financial
service provider, there is a system of quick, orderly and efficient
resolution in favour of depositors.