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FRDI – your Bank deposits at Risk

The BJP led Modi Government is trying to tinker with the minds of people again through banks. Once it miserably failed with Note ban and demonetisation.

Now it is trying to play with the sentiments of depositors and finally, no one would put the money in the banks.
The Centre’s proposed Financial Resolution and Deposit Insurance Bill (FRDI), which is aimed at plugging bankruptcies in the financial services sector, includes a special provision which by definition allows the affected banks to use depositors’ money to absorb some of the losses.

The provision, which finds its origins in the European banking crisis of 2008-09, has raised a red flag after which the Centre hinted at reviewing the proposal.

 FRDI - your Bank deposits at Risk

The proposal is part of the FRDI, which has now been referred to the Parliamentary committee that plans to establish a resolution corporation to monitor financial firms, anticipate the risk of their failure, take corrective action, and work out a resolution plan.

In case of a bank failure, the proposed corporation will provide deposit insurance up to a certain limit, which has not been specified.

Currently, bank deposits of up to Rs 1 lakh are insured but there are few banks that have failed in India in recent years as the Reserve Bank of India (RBI) has stepped in to work out a resolution plan without creating any risk for depositors.

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