07-December-2017 13:49 IST
Provisions of the Financial Resolution and Deposit Insurance Bill, 2017 meant to protect interests of depositors
The Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill), introduced in the Lok Sabha on August 10, 2017, is presently under the 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 rather additional protections to the depositors in a more transparent manner.
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. The 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.
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*बेल आउट* मतलब जब कोई बैंक डूब रही हो तो सरकार अपनी तरफ से पैसा देकर उसे डूबने से बचाये तो उसे बेल आउट कहते है.
*बेल इन* मतलब जब कोई बैंक डूब रही हो तो सरकार उसे इस बात के लिए बाध्य करे कि वो अपने ही असेट बेच कर पैसा खड़ा करे और खुद को डूबने से बचाये.
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नए FRDI बिल में *बेल आउट* का प्रावधान समाप्त कर दिया गया है और *बेल इन* का प्रावधान किया गया है, इस प्रावधान का गलत मतलब निकालते कुछ पत्रकारों ने अफवाह फैलाना आरम्भ कर दी कि बैंक *बेल इन* करने के लिए लोगो की जमा रकम/FD/RD में से निकाल सकती है. जिससे आपकी बैंक में जमा रकम आपको वापस नही मिलेगी.
खबरियों ने *बेल इन* शब्द को लेकर जो अफवाह उड़ाई थी उसके बारे में जानने के लिए मैंने प्रस्तावित एक्ट को पढ़ा उसमे ये नही लिखा है कि *बेल इन* करने के लिए बैंक लोगो की RD/FD/Saving अकाउंट में से पैसे निकाल सकती है.
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नए प्रस्तावित एक्ट के अनुसार बैंक को *बेल इन* करने के लिए जो प्रावधान किए है वो ये है, *(सेक्शन 52, पैरा 3&4)*
1. बैंक अपनी लायबलिटी (उधार) को चुकाने से मना कर सकती है.
2. बैंक कोलेटरल और मार्जिन कम कर सकती है.
3. बैंक नए शेयर जारी करके मार्किट से पैसा उठा सकती है.
साथ ही ये प्रावधान भी है कि बैंक *बेल इन* करते समय नीचे लिखे असेट के साथ छेड छाड़ नही कर सकती *(सेक्शन 52, पैरा 7)*
1. जमाकर्ता का पैसा (जैसे आपकी savings/RD/FD इत्यादि)
2. जमाकर्ता के असेट (जैसे आपकी लॉकर में पड़ी संपत्ति, मॉर्गेज रखे हुए चल अचल संपत्ति)
इसके अलावा *सेक्शन 55 पैरा 1(C)* में भी जमाकर्ता के धन और असेट को सुरक्षित रखने का प्रावधान है.
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तो कुल मिला कर स्पष्ट है कि बैंक चाहे डूब रही हो तो भी वो आपके पैसे को हाथ नही लगा सकती.
हाँ, इतना जरूर है कि बैंको को अब सरकार से *बेलआउट* पैकेज नही मिलेगा उन्हें अपने ही संसाधनों से खुद को *बेलइन* करना पड़ेगा.
कुछ अफवाह बाजों ने इसी *बेलइन* शब्द का इस्तेमाल करके ये झूठ फैलाने की कोशिश की कि बैंक डूबने की स्थिति में जमाकर्ताओं के पैसे डूब जाएंगे।
चिंता मत कीजिये अव्वल तो कोई बैंक डूबेगी नही और यदि बैंक डूबी तो भी आपका पैसा नही डूबेगा, चाहे इसके लिए बैंक को अपनी संपत्तियों को ही क्यो न बेचना पड़े.
MY OBSERVATION:--
The Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill) has created some confusion in minds of depositors. Certain section of vested interest and specially those who are anti_BJP are wilfully creating confusion and spreading wrong meaning of the said proposed bill. As a matter of fact the said bill goes beyond the current provisions to provide greater protection to depositors. The Bill does not modify present protections to the depositors adversely at all. They provide rather additional protections to the depositors in a more transparent manner.
Moreover the said bill is introduced to protect banks and financial institutions in case a situation arises when a bank becomes too weak to sustain.
IN the past too , many private banks and financial institutes have failed and in that position RBI used to intervene and restrict withdrawal of money by a depositors to some amount say Rs.50000 or one lakh in a period of say one month or so. Unfortunately past governments mostly led by Congress Party never thought of protecting banks and never framed a rescue and rejuvenation plan in case of adversity coming to banks or any Financial company.
Even in case of chit funds , many depositors in the past have lost their hard earned money only because there was no rule to penalise promoters of such cheating chit funds. Several Non-banking companies were in market to loot money of innocent common men by offering them higher interest and then they used to fly away from the town and become non-traceable. At that time , no organisation came forward for the safety of cheated and aggrieved depositors.
It is for the first time that Modi government took stern acting against all erring NBCC and chit fund companies and framed enough policy to deal with mischievous persons and companies. Similarly to protect Public sector or private sector banks, government has proposed a bill which has now been referred to Joint Parliamentary Committee to look into pros and cons of the matter and come out with more depositors friendly bill.
As of now , that is before FRDA coming into force, if a bank fails, only an amount of Rs.1.00 lakh (one lakh rupees) is insured and protected under Deposit Insurance and Credit Guarantee Corporation (DICGC). And remaining deposits over Rs 1 lakh are treated at par with claims of unsecured creditors, and in the event of liquidation of a bank, such depositor claims are only paid after preferential payments are made.
Above referred bill has extended more protection to depositors instead of curtailing existing protection.
However ,I make an appeal to experts and specially our Finance Minister to allay all confusion created on FRDI bill 2017 due to misinformation campaign running on social sites . FM should come out with clear and transparent draft of the proposed bill enlightening elaborately the part which deals with protection to depositors.
I ask following to those who are creating panic in common men by misinterpreting FRDI 2017 and submit my arguments pointeise as follows.
As a matter of fact none of depositors should keep more than one lakh rupees in a bank because deposit kept in bank is insured for a maximum value of Rs one lakh only.
As such even if FRDI is not accepted, our deposit more than one lakh kept in bank is even now at risk as per DICGC scheme in vague since 1978
Government has made provisions of ambulance in many places and on many highways so that as soon as an accident occurs , people may call for ambulance and get a quick treatment.
It shows that government is planning to Injure us or kill us by making provisions of ambulances
I or you buy an life insurance policy for say Rs20 lakh or two lakh as per our paying capacity. It means we assess our life Value as Rs 20 or 2 lakh only. We buy insurance policy at our own. In this matter government has no role to play
When a car accident takes place, the family of killed person get an value from insurance company for which car was insured, even if the person killed in that accident may be a beggar or a richest person like Mukesh Ambani.
Likewise when life of a bank ends, it is not value you kept in bank is important but a compensation for your survival is released as per term of insurance.
Principle behind insurance is one and only one and that is minimise the losses to poor by taking premium from all including poor as well as rich.
Suppose you are a billionaire and you are driving a car and which meet accident, it is faulty car or your bad luck.
You keep your precious body in a car which is prone to accident. Similarly you keep your money in bank which is subject to fail. And when a bank fails , it is but natural that money of poor is not lost. A rich can afford survival even if his crore of rupees are withheld. But on the contrary if a billionaire withdraws all his money poor will die in hunger.
Whenever an earthquake comes it has a devastating effect. At that time rescue measures are taken equally for all, poor or rich he may be. Similarl in case bank fails , minimum money meant for survival is first given to all depositors.
Now question arises why should we then keep money in bank?
Yes it is our choice completely and we decide where our money is more safe and growing. Some person keeps money in business, some in gold or dome in stocks or dome in landed property. Suppose we buy 100 shares of a company at Rs1000 per share and the company suddenly incurs loss or due to any reason the share price comes down to Rs100. What recourse we have?
Will government help us.
I ask following to those who are creating panic in common men by misinterpreting FRDI 2017 and submit my arguments pointeise as follows.
As a matter of fact none of depositors should keep more than one lakh rupees in a bank because deposit kept in bank is insured for a maximum value of Rs one lakh only.
As such even if FRDI is not accepted, our deposit more than one lakh kept in bank is even now at risk as per DICGC scheme in vague since 1978
Government has made provisions of ambulance in many places and on many highways so that as soon as an accident occurs , people may call for ambulance and get a quick treatment.
It shows that government is planning to Injure us or kill us by making provisions of ambulances
I or you buy an life insurance policy for say Rs20 lakh or two lakh as per our paying capacity. It means we assess our life Value as Rs 20 or 2 lakh only. We buy insurance policy at our own. In this matter government has no role to play
When a car accident takes place, the family of killed person get an value from insurance company for which car was insured, even if the person killed in that accident may be a beggar or a richest person like Mukesh Ambani.
Likewise when life of a bank ends, it is not value you kept in bank is important but a compensation for your survival is released as per term of insurance.
Principle behind insurance is one and only one and that is minimise the losses to poor by taking premium from all including poor as well as rich.
Suppose you are a billionaire and you are driving a car and which meet accident, it is faulty car or your bad luck.
You keep your precious body in a car which is prone to accident. Similarly you keep your money in bank which is subject to fail. And when a bank fails , it is but natural that money of poor is not lost. A rich can afford survival even if his crore of rupees are withheld. But on the contrary if a billionaire withdraws all his money poor will die in hunger.
Whenever an earthquake comes it has a devastating effect. At that time rescue measures are taken equally for all, poor or rich he may be. Similarl in case bank fails , minimum money meant for survival is first given to all depositors.
Now question arises why should we then keep money in bank?
Yes it is our choice completely and we decide where our money is more safe and growing. Some person keeps money in business, some in gold or dome in stocks or dome in landed property. Suppose we buy 100 shares of a company at Rs1000 per share and the company suddenly incurs loss or due to any reason the share price comes down to Rs100. What recourse we have?
Will government help us.
Not at all.
I submit below the link to article published in this regard in Economic Times
Opinion pubished in Outlook is as follows
Depositors are treated like unsecured creditors, and stands at fifth position in the queue in the waterfall mechanism for distribution of whatever is left in the bank in case of a collapse.
The new institutional framework for dealing with bankruptcies in banks would certainly make your blood boil. First, the depositors are treated like unsecured creditors. They stands at fifth position in the queue in the waterfall mechanism for distribution of whatever is left in the bank in case of a collapse.
Under the new Financial Resolution and Deposit Insurance Bill, 2017, the proceeds from sale of assets of a bank would first go to insured depositors. In the previous regime, the depositors were insured for only Rs 1 lakh irrespective of the deposit made in a bank. The new bill, however, makes no mention of the maximum amount of insured deposit. There is a possibility of government and the regulator, i.e., Reserve Bank of India, keeping the same limit or lower.
The second in the list is resolution costs, which is the cost incurred in the entire liquidation process right from legal cost at the National Company Law Tribunal (NCLT).
The third in the queue are workmen dues for 24 months. The secured creditors are also clubbed with workmen dues at the third position.
At the fourth position are the wages to employees for 12 month.
The amount to uninsured depositors is at the fifth spot. Surprisingly, it is the depositors money that is used in a banking system to do business. It's the core money that actually runs the banking system. These deposits, which will be mostly uninsured as the maximum insured deposit in the earlier bill was only Rs 1 lakh, are now under threat of not getting anything in a an insolvency.
The secured creditors are comfortably sitting at the third spot to recover whatever is left in a bank post liquidation.
Following article published on 18.12.2017 is as follows.
In fact, during the financial crisis in 2008, the Indian government and RBI did have rounds of discussions on raising the limit but they refrained from doing so. It was felt that raising the limit would have made depositors suspicious about the vulnerability of Indian banks which were absolutely safe, with sovereign backing. Besides, the Rs1 lakh limit covers 93% of the depositors (in number) and 30% of the deposits (in value). In other words, the masses have been covered by this limit and the 7% who keep more than Rs1 lakh in bank deposits are presumably savvy on financial matters and well aware of the efficacy of other financial assets.
Link To LiveMint
Depositors are treated like unsecured creditors, and stands at fifth position in the queue in the waterfall mechanism for distribution of whatever is left in the bank in case of a collapse.
The new institutional framework for dealing with bankruptcies in banks would certainly make your blood boil. First, the depositors are treated like unsecured creditors. They stands at fifth position in the queue in the waterfall mechanism for distribution of whatever is left in the bank in case of a collapse.
Under the new Financial Resolution and Deposit Insurance Bill, 2017, the proceeds from sale of assets of a bank would first go to insured depositors. In the previous regime, the depositors were insured for only Rs 1 lakh irrespective of the deposit made in a bank. The new bill, however, makes no mention of the maximum amount of insured deposit. There is a possibility of government and the regulator, i.e., Reserve Bank of India, keeping the same limit or lower.
The second in the list is resolution costs, which is the cost incurred in the entire liquidation process right from legal cost at the National Company Law Tribunal (NCLT).
The third in the queue are workmen dues for 24 months. The secured creditors are also clubbed with workmen dues at the third position.
At the fourth position are the wages to employees for 12 month.
The amount to uninsured depositors is at the fifth spot. Surprisingly, it is the depositors money that is used in a banking system to do business. It's the core money that actually runs the banking system. These deposits, which will be mostly uninsured as the maximum insured deposit in the earlier bill was only Rs 1 lakh, are now under threat of not getting anything in a an insolvency.
The secured creditors are comfortably sitting at the third spot to recover whatever is left in a bank post liquidation.
Following article published on 18.12.2017 is as follows.
In fact, during the financial crisis in 2008, the Indian government and RBI did have rounds of discussions on raising the limit but they refrained from doing so. It was felt that raising the limit would have made depositors suspicious about the vulnerability of Indian banks which were absolutely safe, with sovereign backing. Besides, the Rs1 lakh limit covers 93% of the depositors (in number) and 30% of the deposits (in value). In other words, the masses have been covered by this limit and the 7% who keep more than Rs1 lakh in bank deposits are presumably savvy on financial matters and well aware of the efficacy of other financial assets.
Link To LiveMint
very nice article.Thanks.
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