Govt committed to protect public deposits, says Jaitley

NEW DELHI: Finance Minister Arun Jaitley today reiterated that deposits of customers in banks will be protected under the Financial Resolution and Deposit Insurance (FRDI) Bill. The government has repeated this message within days of a clarification on the FRDI Bill which is facing flak for the treatment of depositors in case of resolution proceedings for banks and financial institutions.

Finance Minister Arun Jaitley chairs a pre-Budget consultative meeting with leading economists in connection with the forthcoming Union Budget 2018-19, in New Delhi on Monday. PTI

Sanjeev Sharma

Tribune News Service

New Delhi, December 11

Finance Minister Arun Jaitley today reiterated that deposits of customers in banks will be protected under the Financial Resolution and Deposit Insurance (FRDI) Bill.

The government has repeated this message within days of a clarification on the FRDI Bill which is facing flak for the treatment of depositors in case of resolution proceedings for banks and financial institutions. The Bill is already seeing an online petition campaign and is being opposed in its present form.

With NPAs mounting in the system and more and more companies coming under the Bankruptcy Code, there is also concern about the fallout for smaller NPAs whose numbers will be much larger.

“Seeking to quell misgivings and rebutting false rumours”, Jaitley said today if banks do fail, the government will “fully protect” the deposits made by customers. “The government is very clear about it.”

“About Rs 2.11 lakh crore is being pumped in to strengthen public sector banks” Jaitley said. “So no such question (failure of banks) arises.”

The Finance Minister said the FRDI Bill, 2017 is before the Joint Committee of Parliament. “Whatever are the recommendations of the Committee, the government will consider”, he said adding “rumours are being spread about the Bill”.

He added that the government has already clarified and said it is committed to strengthen the PSU banks and the financial institutions.

The FRDI Bill seeks to provide resolution for lenders and the controversy has erupted over the “bail-in” clause of the Bill as there are questions on the treatment of deposits by customers in the event of a bank failure.

In a clarification issued by the Finance Ministry last week, the government said 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.

“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 government had said.

At present, 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).