‘No Decision Taken To Reintroduce FRDI Bill’, says Govt, Doesn't Rule It Out Either
The ministry of finance has issued a rare clarification to say that the Union government has not taken any decision to reintroduce the Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill). This follows panic caused by social media messages about mounting non-performing assets (NPAs) of banks following the coronavirus (COVID) pandemic and the fear that bank deposits would be impounded to recapitalise banks. The Reserve Bank of India (RBI) governor had also alluded to the need for this Bill at a recent conclave. 
 
However, the government makes no mention of the Financial Sector Development and Regulation (Resolution) Bill, 2019 (FSDR), which was scooped by Moneylife in December 2019. This Bill had modified the earlier FRDI Bill and removed direct reference to the controversial ‘bail-in’ clause while authorising a Resolution Authority to modify all contracts – presumably those with depositors as well. Moneylife had also seen a copy of the briefing note from the finance ministry to the Union Cabinet. 
 
Interestingly, the government clarification does not say that plans for such a legislation have been shelved, but only that there was ‘no decision’ on the issue.  It is however clear that the current panic among depositors is rather premature, but their fears also indicate that any hasty action to bring a draconian bill without taking people into confidence will backfire badly. 
 
The FRDI Bill was introduced in Lok Sabha on 10 August 2017 and, then it was referred to the Joint Committee of Parliament (JPC) for examination and report thereon.
 
"The government had withdrawn the FRDI Bill in August 2018 for further comprehensive examination and reconsideration of the subject," the ministry had said.
 
The FRDI Bill had triggered panic among depositors over the controversial ‘bail-in provision’ which held out the threat of forcibly converting term deposits with banks (above a certain insured threshold) into equity to recapitalise failed banks. Perhaps the small investor did not believe government’s assurance, but the bail-in clause of FRDI punctured the trust of large numbers of small creditors, who feared benefit to the non-performing asset (NPA)-causing corporate borrowers responsible for around 80% of NPAs, at their financial cost.
 
However, as reported by Moneylife, the government has been trying to introduce revised Financial Sector Development and Regulation (Resolution) Bill, 2019 (FSDR), instead of FRDI.
 
Unlike FRDI, the FSDR draft is not available to the public, so one would wonder why FRDI was to be replaced by FSDR, which is aimed at the rescue of banks – among other financial institutions – from collapse.  
 
A briefing note prepared by economic affairs secretary, Atanu Chakraborty had made some astonishing assertions about the financial sector (Read: Moneylife Exclusive - FRDI Bill To Come Back as FSDR: Many Questions Unanswered)
 
The new Bill had covered a wide spectrum of financial entities including banks, insurance companies, financial market infrastructure, payment systems and other financial service-providers (excluding individuals and partnership firms) which are now scattered under different legislations. For the first time, it also covers cooperative banks and regional rural banks. 
 
It provided clearly defined triggers for prompt corrective action (PCA) framework to bring a problem institution into resolution. It also claims to cover a ‘systemic vacuum’ with regard to bankruptcy situations and will include the resolution of large non-banking finance institutions. 
 
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    COMMENTS

    umeshs62

    3 months ago

    Without making any adverse comment on government, a strong & credible opposition party is important for democracy to thrive.

    bala.mathur

    3 months ago

    If we had a responsible and sensible opposition in this country, drastic measures as FRDI Bill which are political suicides, would have never been even contemplated by any ruling party.

    REPLY

    surajitghosh628

    In Reply to bala.mathur 3 months ago

    Correct. The opposition party of the country is busy only China and ladhakh

    alok.asthana

    In Reply to surajitghosh628 3 months ago

    Let us be thankful that at least someone is.

    SEBI extends relaxations of norms till 31st December for buy back, open offers
    The Securities and Exchange Board of India (SEBI) on Monday extended the relaxations on its regulations for buy back and open offers up to December 31.
     
    The securities market regulator in May granted one-time relaxations from strict enforcement of certain regulations of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and the SEBI (Buy back of Securities) Regulations, 2018 pertaining to open offers and buy-back through tender offers opening upto July 31.
     
    "Based on the representations received from the market participants, the validity of relaxations is further extended and shall be applicable for open offers and buy back through tender offers opening upto December 31, 2020," said the SEBI circular.
     
    In another development, the regulator has introduced a one-time settlement scheme for entities that executed trade reversals in the stock options segment of BSE from April 1, 2014, to September 30, 2015.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Extreme risk aversion to have adverse outcomes: RBI Governor Das
    As the economy reels under the pandemic and post lockdown woes, Reserve Bank of India (RBI) Governor Shaktikanta Das is of the view that extreme risk aversion by financial institutions will have adverse outcomes for all.
     
    Noting that India's financial system remains sound, Das, in his foreword to the RBI's latest Financial Stability Report, wrote that in the current environment, the need for financial intermediaries to proactively augment capital and improve their resilience has acquired top priority.
     
    "In the evolving milieu, while risk management has to be prudent, extreme risk aversion would have adverse outcomes for all," he wrote.
     
    The Governor's statement gains significance as concerns have been raised that banks are still risk averse and are largely shying away from lending in general, except for the sovereign guaranteed ECLGS loans for MSMEs.
     
    The Financial Stability Report for July 2020 also shows that bank credit, which had considerably weakened during the first half of 2019-20, slid down further in the subsequent period with the moderation becoming broad-based across bank groups.
     
    "Subdued bank credit shows clear signs of risk aversion," the report said.
     
    The Governor also said that currently there is growing disconnect between the movements in certain segments of financial markets and real sector activity.
     
    The pandemic hit India in a period of growth moderation and the ensuing disruptions in demand conditions and supply chains have been aggravated by global spillovers, he added.
     
    "Of late, signs of a gradual recovery from the nationwide lockdown are becoming visible," Das said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Meenal Mamdani

    3 months ago

    Really! The RBI governor must live in an alternate world.
    The banks are being pilloried in the news for succumbing to political pressures and giving loans to politically connected corporates.
    Is Mr Das prepared to stand by the banks who give loans now and assure the public that there has been no hanky panky in the loan approval process?
    The bank CEOs are being vilified while those that exert pressure are being shielded by the RBI.

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