1. When the existing system is fine and there is nothing to fear about, then why need for a new Financial Resolution and Deposit Insurance (FRDI) Bill in the present form and substance ?
2. If all is fine with the Bill, why suddenly the “Bail In “clause is introduced which means, that in case of a failure of a financial institution, the depositors money can be converted in to equity of the Bank/ Financial Institution which is in distress, meaning thereby that from the position of creditor the depositor would become the shareholder of the Bank and in the waterfall mechanism, as all know the equity share holder would be the last person in the queue in case of liquidation.
3. If the implicit guarantee of the government for public sector Banks remain unaffected, then does it mean, that the same would not be the case for private corporate sector banks ?
4. If the government is of the view that the Indian Banks have adequate capital and extant regulations and oversight to ensure safety and security , then where is the need for another regulator in the form of “ Resolution Corporation” and would it not dilute the authority of RBI which presently is doing a fine job at least in the matter of regulation of Banks.
5. As it stands today, technically the depositors in the Bank are unsecured creditors and because of the implicit sovereign guarantee for the public sector banks, there is no worry about the safety and security of the deposits. But when this new bill is implemented, then there is a possibility that such sovereign guarantee would no longer be available and you can imagine the consequences of such an action.
6. In the case of Insolvency & Bankruptcy Code, 2016(IBC), which was primarily brought to fight the menace of NPA with the Banks and for the protection of financial creditors and the recovery of the bad assets, here in comes a new likely legislation which tries to protect the debtor (read Banks) instead of protecting the creditor(read depositors). Anyone can see the diametrically opposite stand taken by the government when it comes to the protection of the depositors vis-à-vis the commercial banks and all out efforts to “Bail Out” the stressed commercial Banks at the cost of depositors .Is this DEMON 2.0in the making ?
7. When all of us are talking of financial inclusion, JAN DHAN, routing all transactions of the people through banks, cash less transactions etc., why at all anyone would keep the money in the Bank, if such legislation is contemplated by the Government and no wonder there is a sudden spike in the Post Office Deposits as on date.
8. In all fairness, the least the government can do now is that either remove the “Bail In “ clause or explicitly state that the “Bail In” clause would not be applicable to retail deposits so that there would not be any panic in the system and in my opinion the government is playing with Fire.
(The author can be reached at firstname.lastname@example.org)