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News:
- Centre is pulling out FRDI Bill
Important facts:
2. The Bill named “the Financial Resolution and Deposit Insurance Bill, 2017 was introduced in Lok Sabha last year.
3. Reasons for withdrawing the Bill:
- The Bill was in controversy for “Bail-in Clause” provision.
- Under bail-in clause provision, banks are essentially dependent on depositor for funds from which they provide credit to borrowers.
4. The withdrawal should be used as an opportunity by policymakers to reappraise the existing framework for resolving bankruptcy scenarios among financial entities.
5. Way ahead:
- Need to review progress made by the Insolvency and Bankruptcy Code in addressing the crucial issue of debt resolution in the banking sector.
- Need to look at ways to strengthen the Deposit Insurance and Credit Guarantee Corporation.
- DICGC, which set up in the early 1960’s guarantees repayment of bank deposit up to Rs 1 lakh in case a bank is liquidated, has not reviewed the amount under guarantee since 1993.
- Measures that helps prevent further erosion of public faith in the beleaguered banking system would be very welcome step in this direction.
