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FRDI Bill Bail in Clause: Your FD and Saving Balance in Bank Account is not Safe if FRDI Bill is Passed

FRDI Bill Bail in Clause: Your FD and Saving Balance in Bank Account is not Safe if FRDI Bill is Passed

Bail in Clause by Banks under FRDI Bill can make your Fixed Deposits and Account Balance at Risk as it can empower Banks to freeze in your FD and Account. Details on Bank Bail in Clause

 

FRDI Bill and Banks Bail in Clause

Demonetization, GST, Fight against Black Money, Clean India and Corruption Free India remains the Highlights in BJP Government

But is now Coming up the FRDI Bill - which is what leading to concern on Fixed Deposits in Bank and possibly the worst thing which can impact in all of us as the deposits in the Banks can end up been Vulnerable.

 

What exactly is FRDI Bill and What Powers are under Bail in Clause

FRDI is Financial Resolution and Deposit Insurance Bill which in layman language is going to empower Banks and Financial Institutions use in Depositor Money to remain well in Business

However its important to note why this FRDI is coming. Gross NPA of all Commercial Banks stood at around 10%. It means 1 out of every 10 loans as disbursed by Banks is NPA

So if the Bank is in Financial Trouble, a corporation will be set up with representative from Bank, SEBI, RBI and other regulatory authority and based on Financial condition of Banks and can use in Deposits as done by Account Holders to bail out Bank by taking below steps

1. Not allowing the Fixed deposits to get Matured as per Regulatory discretion so as not to let Bank been Cash Crunch

2. Lock Deposits and convert them at Bank Discretion for Higher Tenure Deposits at Bank Discretion

3. Convert even your Saving Account, Current Account Balance to Fixed Deposit as per sole discretion of Bank at prevailing Interest Rate.

4. Suppose you sell Property and Buyer issues you a Demand Draft. The Payment is realized and amount Credited in your account. But you may end up with Shock if you find next day morning that the Bank has Bail in by locking your amount and converting it into Fixed Deposit at its will

5. If Corporation decide that Capital Infusion can work then Bank can even convert your Deposits to Bonds or Shares

6. In Worst Case Scenario, Bank can use your Deposits to remain bank in Functioning and if unable to still bail in the Bank from Financial Trouble - the Corporation as set up can have authority to declare that they cant pay you back in complete or partial payment. Even Credit Guarantee Insurance will not work of Rs 1 Lakh

Thus the Bank instead of using in Government Funds will rather use Depositor sum to remain in Business and in event of Failure may owe you nothing.

Means all your Fixed Deposits will be wiped Off in case of Financial Trouble. Thus – the Government do not need to use its Corpus to allow bailing out Bank. Rather the depositor sum will be use to Bail out Bank in event of Financial Trouble.

Importantly - This FRDI Bill does not distinguish in between PSU or Private Banks

 

Why is FRDI Bill Troublesome for Fixed Deposit, Account Holders

Gone will be days when Keeping Balance in Banks will be Trust worthy. If FRDI Bill is passed, then it actually will make a Fixed Deposit Account Holder rather worse than a Share Holder

So in event of Bank going in Financial Trouble – your Fixed deposit money can be locked by Bank on its Discretion and you even can not withdraw in, what ever the need be. Leave aside Premature Withdrawal – you can not even withdraw your Saving Bank Account Balance for same.

The same Incident happened in Cyprus in 2012 – 2013, where its estimated that depositors were wiped off with 50% of deposits during financial crisis there.

For People who have invested there Life Time Savings in Banks in form of Fixed Deposits, Saving Account can end up been at risk as in event of Economy been trouble or Specific Bank in Trouble – it can just freeze in money in Bank Account at there own discretion leaving the account holder on his own.

The Bill is to be table in Parliament in upcoming Winter Session from 15th December 2017 to 5th January 2018 and if the bill is passed then it will have a long lasting impact on Account Holder in Banks – where there own hard earned money can not be termed safe.

 

Government View on FRDI Bill

As per Government View the FRDI Bill is rather done to provide additional Protection to Depositors. The Finance Minitsry says that in event of Financial issue with Bank. rather the depositor money claim will be of highest priority (as against present scenario where FD Claim are insured for just 1 Lakh as per DICGC Guarantee)

Even a corporartion will be set up with Experts so as to let Bank sail in trouble times and also be competent enough to pay back Depositor money back (Fixed Deposit or Saving Account). Also - the Resolution Corporation has to report to Central Government with a proper report before going for Bail in Clause.

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Comments 1

Guest - Saahil on Saturday, 09 December 2017 17:49

FD is considered as most secured form of investment in India
Many pensioners, senior citizens including mid age group people have fd in banks
Touching FD including account balance will bring in mass retaliation in India

It would be the last thing to bring any changes on fd law, Modi government and Arun Jaitley ji - kindly do not make such provisions which can be disastrous

FD is considered as most secured form of investment in India Many pensioners, senior citizens including mid age group people have fd in banks Touching FD including account balance will bring in mass retaliation in India It would be the last thing to bring any changes on fd law, Modi government and Arun Jaitley ji - kindly do not make such provisions which can be disastrous
Guest
Monday, 11 December 2017

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