FRDI Bill aims looting depositors

• FRDI is  Financial Resolution and Deposit Insurance Bill (FRDI), 2017. The purpose of Section 52 in FRDI Bill 'bail-in' is to absorb the losses incurred, or reasonably expected to be incurred, by the covered service provider and to provide a measure of capital for it so as to enable it to carry on business for a reasonable period and maintain market confidence in it.
• Under FRDI Act, any stressed bank can freeze deposits indefinitely or refuse deposit repayment or pay part amount in full discharge of deposit unilaterally or issue securities in lieu or do in what ever fashion in the best interests of running bank's business without hindrance. In Cyprus, depositors lost almost 50% of their savings when a “bail-in” was implemented. 
• At present, each depositor of banks is protected up to a limit of Rs. 1 lakh by the guarantee of the Deposit Insurance and Credit Guarantee Corporation (DICGC). The amount insured by DICGC per depositor in a respective bank has been Rs. 1 lakh, since 1993. The bill repeals the DICGC Act, 1961, and subsumes its functions into the resolution corporation. Conservatively this limit would have been at least Rs. 5 lakhs, if not Rs.10 lakhs, which was not enhanced during past 24 years.
• Bank deposits are popular in rural areas because of a lack of alternate opportunities like mutual funds or stock markets. Further, given the small size of savings of the majority of citizens, the deposit schemes of banks seem an attractive option. Most retired employees keep their life time savings in deposits and live on the deposit interest paid to them on month-on-month basis. In an emerging country like India, where financial instruments are scarce and alternatives like financial markets aren’t developed, a bail-in as a resolution mechanism should be avoided. 
• The depositor whose money is given as loan to the borrower is likely to lose his share of deposit in case of a “bail-in”, whereas the borrower who availed himself of the loan is likely to get off scot-free. The “bail-in” concept is a double whammy.
• The 'bail in' is an evil scheme to 'bail out' the owners (Govt of India in case of PSU banks) with depositors money (of middle and lower classes) without their consent for their incompetence and mischief in managing their banks prudently.
• When the government recapitalises a bank, it uses taxpayers money. It can be argued that using resources contributed by taxpayers who are not related to stressed banks is unfair. This bail-in resolution mechanism uses depositors’ money, who are not owners of the bank, and is also unfair.
• There is already a resolution mechanism for all financial service providers, which is available with the RBI. We also have an insolvency and bankruptcy code. We have National Company Law Tribunal. Where is the need for a new resolution mechanism? The Bill is fundamentally flawed because it has been blindly copied and pasted from the Western model, whereas the situation in India is totally different. 
• At present the bank deposits are over Rs 110 lakh crores. 67% of depositors holds 8.6% of deposits less than Rs. 1 lakh. 33% of depositors hold deposits over Rs. 1 lakh. The term depositors of above Rs 15 lakh is only 1.3%, who holds 55% in terms of amount of the total term deposits. And government wants to lay its hands on this money to cover their failures in managing banking system.
• No one trusts the government when it says 'trust me'. Why should any one trust the government with imminent hair cutting of their deposits? Why worry depositors when the government intends to protect them? Why have the bail-in clause at all if the government will stand behind bank depositors? Modi & Jaitley must explain.

In order to cover up the failures, the centre wants the common depositors 

to forego their life-savings ... Mamata Banerjee

If government was concerned about welfare of depositors, it would have simply increased DICGC per depositor from Rs. 1 lakh to Rs. 5 lakhs or Rs.10 lakhs and wound up failed banks as per prevailing laws of the land. The FRDI is aimed at passing on the losses of banks to gullible depositors with haircut and running their inefficient banks detrimental to public interest. Like demonetization, GST roll out etc this FRDI is evil intentioned and is bound to fail. Government is by the people, of the people and for the people. Any scheme of things aiming at looting common man's money will be shot down by people. Common sense tells us that recapitalisation must be done by owners themselves not others. In case of PSU banks, central government is the owner and recapitalisation must be done through central government budget only. Any other way is not only wrong and immoral but will also fail.