Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
RSS

News

FRDI Bill to protect existing rights of depositors: Government

Author: IANS/Wednesday, January 3, 2018/Categories: Government

FRDI Bill to protect existing rights of depositors: Government

New Delhi - The government has said the proposed Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 seeks to protect and enhance depositors' "existing rights and bring in a comprehensive and efficient resolution regime for financial firms".

According to the Ministry of Finance, there is presently no comprehensive and integrated legal framework for resolution, including "liquidation, of financial firms in India".

The ministry said that current resolution instruments available under respective legislations are "limited, and so is guidance on the process leading up to the resolution". 

"The current resolution regime is especially inappropriate for private sector financial firms in the light of significant expansion of private financial firms and many of these acquiring systemically important status in India," the ministry said in a statement. 

"The Insolvency and Bankruptcy Code, 2016 has introduced in the country a comprehensive resolution regime for mainly non-financial firms, but such a regime is not available in the country for financial firms." 

The ministry said the FRDI Bill proposes to establish a "Resolution Corporation" and a comprehensive regime to enable timely and orderly resolution of a failing financial firm. 

"It provides for detecting incipient insolvencies in financial firms by introducing a five-stage health classification of financial firms and stepping in to appropriately nurse a financial firm at the stage when its health becomes weak and it is classified in the category of material risk to viability," the statement said.

"FRDI Bill also introduces a menu of resolution tools, including transfer of whole or parts of the assets and liabilities of a financial firm to another person, acquisition, merger or amalgamation, bridge service provider, and bail-in, and mandates recovery and resolution planning obligations to enable careful monitoring of risk to viability of a financial firm."

On the "Bail-in" provision of FRDI Bill, the ministry said that it has only been proposed as one of the tools to be used in the event a financial firm is sought to be sustained by resolution. 

"Bail-in amounts to liabilities' holders bearing a part of the cost of resolution by reduction in their claims. Bail-in is only one of many resolution tools in the FRDI Bill; others are acquisition, merger and bridge service provider, and is to be used either singly or in combination with other tools," the statement explained.

"Bail in provision may not be required to be used in case of any specific resolution. Most certainly, it will not be used in case of a public sector bank as such a contingency is not likely to arise." 

The ministry added that FRDI Bill does not prohibit the central government from extending support to banks, including PSBs. 

"Government's implicit guarantee for solvency of public sector banks remains unaffected as the government remains committed to adequately capitalise the public sector banks and improve their financial health," the ministry said. 

"The government is committed to protecting the existing protection to depositors and providing additional protection to them." 

At present, the FRDI Bill which was introduced in the Lok Sabha on August 10, 2017 is under the consideration of the Joint Committee of Parliament, which is consulting all the stakeholders on the provisions of the FRDI Bill. 

"The Joint Committee of Parliament has been asked to submit their Report to the Parliament by the last day of the Budget Session, 2018," the statement added.

"The government is awaiting the recommendations of the Joint Committee of Parliament in regard to the FRDI Bill and would favourably consider the recommendations."

Print Rate this article:
No rating

Number of views (146)/Comments (0)

rajyashree guha

IANS

Other posts by IANS
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free