Financial Resolution and Deposit Insurance (FRDI) Bill, which was once opposed vigorously by the leaders of the cooperative banking sector is again being talked about in the corridors of Finance Ministry.
Soon after the presentation of budget the Union Finance Minister has hinted at the emergence of FRDI bill in a new avatar. “Finance Minister Nirmala Sitharaman said her ministry is working on the controversial Financial Resolution & Deposit Insurance (FRDI) Bill, but added she is not sure when it will be tabled in the House”, quotes PTI.
The new format of the said bill is not known to us yet and thus we cannot react, said NAFCUB President Jyotindra Mehta to Indian Cooperative. “But we are happy that the risk-based premium has not been accepted by government and it’s a great relief for UCBs”, Mehta added.
“It is a great success for NAFCUB as since last two years we had been representing not to levy premium on differential bases and here it stands accepted”, Mehta added.
The original Bill first proposed in 2017 and withdrawn in 2018, had a ‘bail-in’ clause for resolution of bank failure which was regarded as a step against the savings account holders.
It bears recall that the apex body of urban cooperative banks of India NAFCUB has made a representation before the Joint Parliamentary Committee (JPC) headed by Bhupendra Yadav on the proposed Financial Regulation and Deposit Insurance Bill 2017.
The Bill aims at dealing with bankruptcies in banks, insurance companies, and other financial intermediaries through a ‘Resolution Corporation’ and a ‘Corporation Insurance Fund’.
The bill is a banking version of Insolvency Act currently applicable to companies and corporates. The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
The bankruptcy code is a one stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement. The code aims to protect the interests of small investors.
The finance minister’s comments assume importance given the massive five-fold hike in deposit insurance and the recent changes in the insolvency laws to include insolvency provisions for financial institutions, following which leading mortgage player DHLF was sent to NCLT last November, reports PTI.
“We are working on the FRDI Bill; but not sure when it can get through the House,” the minister told reporters here without elaborating.