{"id":32317,"date":"2018-10-29T13:34:47","date_gmt":"2018-10-29T08:04:47","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=32317"},"modified":"2018-10-29T13:34:47","modified_gmt":"2018-10-29T08:04:47","slug":"clearing-the-air-on-the-bail-in-clause","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/clearing-the-air-on-the-bail-in-clause\/","title":{"rendered":"Clearing the air on the bail in clause\u00a0"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/business\/Economy\/clearing-the-air-on-the-bail-in-clause\/article22360662.ece\"><strong>Clearing the air on the bail in clause<\/strong><\/a><strong>\u00a0<\/strong><\/p>\n<p><strong>Context<\/strong><\/p>\n<p>The government on Tuesday issued another clarification on the Financial Resolution and Deposit Insurance Bill in a bid to clear the air about the many misgivings about the proposed Bill\u2019s most notorious clause: the bail-in.<\/p>\n<p><strong>What does the Bill seek to do?<\/strong><\/p>\n<ul>\n<li>It is meant to consolidate all the various regulatory laws covering India\u2019s financial institution<\/li>\n<li>It also seeks to create a Resolution Corporation (RC) that will be in charge of winding down, reviving, or resolving in any other way an ailing financial company<\/li>\n<li>As such, the Bill is to work in tandem with the Insolvency and Bankruptcy Code.<\/li>\n<li>To do this, one of the tools the RC will be empowered with is a bail-in, in which a bank\u2019s liabilities can be cancelled or modified to shore up its finances. This clause created a lot of alarm as many felt it would put depositors\u2019 money in banks at risk.<\/li>\n<\/ul>\n<p><strong>Are deposits at risk?<\/strong><\/p>\n<ul>\n<li>The government said that under the current Deposit Insurance and Credit Guarantee Corporation Act, deposits up to\u00a0<em>\u20b9<\/em>1 lakh are insured. Under the FRDI Bill, the RC will be empowered to increase this limit to whatever it chooses. So, at least that much will be protected.<\/li>\n<li>Further, the government said that under the FRDI Bill, the claims of uninsured depositors (that is, beyond\u00a0<em>\u20b9<\/em>1 lakh) would be given precedence over the claims of unsecured creditors and government dues. This is currently not the case.<\/li>\n<\/ul>\n<p><strong>But what about the bail-in?<\/strong><\/p>\n<ul>\n<li>The government has finally clarified that the bail-in clause will not be used for public sector banks (PSBs).<\/li>\n<li>It also reiterated its implicit guarantee of PSB solvency. In other words, it said that it \u201cstands ready\u201d to bail-out the PSBs if needed, removing the need for a bail-in.<\/li>\n<li>Equally important, the statement said that the cancellation of the liability of a depositor beyond the insured amount cannot take place without his or her prior consent<\/li>\n<li>So, the bail-in clause can only be used in private banks, and that too only if the customers allow it.<\/li>\n<\/ul>\n<p><strong>Is that all protecting depositors?<\/strong><\/p>\n<p>No. The use of the bail-in clause by the RC will be subject to government scrutiny and parliamentary oversight. In the event of a bail-in, the RC will have to ensure that depositors get back at least as much money as they would have if the bank had been liquidated.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Clearing the air on the bail in clause\u00a0 Context The government on Tuesday issued another clarification on the Financial Resolution and Deposit Insurance Bill in a bid to clear the air about the many misgivings about the proposed Bill\u2019s most notorious clause: the bail-in. What does the Bill seek to do? It is meant to&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/clearing-the-air-on-the-bail-in-clause\/\">Continue reading <span class=\"screen-reader-text\">Clearing the air on the bail in clause\u00a0<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-32317","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704899533},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/32317","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=32317"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/32317\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=32317"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=32317"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=32317"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}