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3:24 pm - Wednesday April 22, 1598

AIBEA contemplates of strike over FRDI bill if Govt proceeds further: Venkatachalam

Agencies, Hyderabad

All India Bank Employees Association (AIBEA) is contemplating to go on a strike if the Union Government proceeds further on the unwarranted Financial Resolution and Deposit Insurance Bill (FRDI) which was referred to the Joint Parliamentary Committee (JPC).

AIBEA General Secretary Ch Venkatachalam said on Tuesday that after the Union Cabinet approved the FRDI bill, it was later introduced in the Parliament on the last day of the last session and now it was referred to the JPC. He said the AIBEA has already appeared before the JPC and urged upon them to reject the Bill.

The Bill has created widespread fear, apprehension and panic amongst the Depositors that the Government is contemplating to liquidate the Banks and the Deposits of the Banks will not be returned because of the Bail-in Clause of the Bill.

The AIBEA General Secretary said in the wake of the financial sector crisis in the US and other countries in 2008, the Governments there had to bail-out many failed Banks with tax-payers money and the Financial Stability Board (FSB) came up in 2009 where the G-20 countries are members.

The FSB had made framework policies and guidelines to deal with banking financial institutions in the eventuality of their failures. India is also a part of G-20 and this FSB, he added.

Based on their guidelines, Mr Venkatachalam said the need arose to make special legislation in India and the issue was first brought to attention by Union Finance Minister Arun Jaitley in his 2016-17 budget speech.

In March 2016, a committee was set up under the chairmanship of Ajay Tyagi, Additional secretary, Department of Economic Affairs, Ministry of Finance, to draft and submit the Bill. The draft of Financial Resolution and Deposit Insurance Bill 2017 was drawn up based on the recommendations of this committee.

After considering the suggestions, the Union Cabinet approved the introduction of FRDI Bill 2017 in Parliament. Mr Venkatachalam said the FRDI Bill provides for setting up a new authority Financial Resolution Corporation (FRC) which will deal with liquidation and resolution of Banks Insurance and other financial institutions.

He said the FRC will supersede the powers of RBI and other agencies dealing with the problem at present. Deposit Insurance Corporation (DIC) guarantees Deposits up to Rs 1 lakh per customer. This will be closed down and the FRC will decide the amount now, he said.

The top Union leader said today 2125 commercial banks and co-operative banks were covered under DIC covering total deposits of Rs 103 lakh crore. Of this, under the present scheme with the ceiling of Rs 1 lakh per customer, only Rs 30 lakh crore are covered under insurance.

Balance deposits are not covered even today, he said, adding that there is a need to cover the entire Deposits of the Banks so that in a country like India, common people feel assured of their hard-earned savings and there is no threat to their deposits.

Mr Venkatachalam said, instead, FRDI Bill is talking of removing even the existing ceiling of Rs. 1 lakh. The Government should clarify on this to the people, he demanded. In addition, the FRC has power to liquidate any Bank. The FRC can permit to use the Depositors’ money to bail-in a Bank.

This provision is creating doubt and panic in the minds of every one. Mr Venkatachalam reminded that in India, between 1913 to 1960, nearly 1600 private Banks failed, and closed down.

Depositors lost all their money kept in the banks. Hence AIBEA took up the issue in Parliament and an amendment was made to Banking Regulations Act in 1960 by which any Bank failing will be put on moratorium and merged with another Bank.

That is why since then, in the last more than 55 years, though many private banks faced liquidation, all these Banks were merged with another Bank and no Bank has been liquidated since then. No depositor has lost his/her money, he clarified.

He said it is regrettable that at a time when the common people already worried about their money in the Banks due the huge bad loans and consequent write off, loss of revenue, losses being incurred by banks, etc., instead of assuring the people about the safety of their money kept in the Banks, the Government has chosen to bring this FRDI Bill which deals with possible liquidation of Banks.

Instead of taking stringent measures to recover the huge bad loans from the big corporate companies and other major defaulters and strengthening the Banks, he alleged that the Government is bringing this FRDI Bill to oblige the IMF and succumbing to the pressures of the Financial Stability Board.

This Act is required for those countries where the Banks are in private hands and where the regulations on Banks on liberalized. Hence question of liquidation of our Banks does not arise at all and hence there in no need or scope of Bail-in. Hence the entire FRDI Bill is misplaced in Indian context and wrongly timed.

For India, FRDI Act is unwarranted. ‘’The Government should reconsider and defer the whole Bill and assure the people that their money in Banks is totally safe and guaranteed by the Government’’.

They must take tough measures to recover the bad loans and make our banks more viable and vibrant, he added. Mr Venkatachalam said people should stop from panic and fear and fight against the wrong policy of the Government to weaken the Banks.

Posted in: Business

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