FRDI bill may take away all your hard-earned money

Lord Nemesis

Lord Nemesis

Overlord
Skilled
The next logical step after demonetization

People with money in Nationalized banks, please watch out. Most of them are doing very badly due to bad loans. This bill if it gets passed would allow the these banks to abuse it to fill their holes using peoples money without any liability towards you and continue issuing more bad loans to Adani's and Ambani's

http://indiatoday.intoday.in/story/...di-government-india-parliament/1/1103422.html


In June 2017, the Central government approved the FRDI Bill which is intended to frame new rules for banks that are failing. It has created panic among savings account holders. According to the Bill, if a bank is failing, may be allowed to use depositors' money to stay afloat. What this means is that the bank can reduce its liability of paying its depositors, that is you, by either locking your money for a longer time or asking you to take a hit on your deposits.


Currently, your deposit in the bank is insured up to a specified limit.According to the 1961 Deposit Insurance and Credit Guarantee Corporation Act, up to Rs 1 lakh of your money deposited in a bank is insured if a bank were to fail. In practice, however, the Reserve Bank has ensured that this never happens. Failing, or weak banks, have been merged or allowed to be taken over by healthier banks including their liabilities.

But the proposed banking reforms bill will change that. That, some say, will give government banks, private banks and insurance agencies more power over your money.

FYI | What is a bail-in?

The Bill provides for "bail-in" powers to banks. A rescuing body known as Resolution Corporation has been proposed under the Bill which can use your money in case the bank sinks.This is different from a traditional bailout in which government's money helps bank tide over the crisis. In case of a bail-in, it is the bank's own deposits (that is your money) that is used to rescue the bank or reduce its liabilities.

WHY IS IT IMPORTANT?

When you deposit money in a bank or invest in fixed deposits, you trust the bank with keeping your money safe, forever. Even a remote possibility of you having to lose it all or even part of it for no fault of yours is disturbing.

We take you through 10 steps which will help you understand the Bill:

TAKE A LOOK:

  • Under Section 52 of the FRDI Bill, the rescue body can cancel even the Rs 1 lakh insurance that you get under the current law. In this case, a bank can even declare that they don't owe you any money at all.
  • The same Section provides an option to the rescue body to modify a bank's liability. For example, if you deposit a certain amount of money for a certain period of time as savings (say, 5 or 10 years), the bank can keep the money in a locked-in period (in a FD) and change the time period without consulting you.
  • According to the bill, the bank may be exempted to fulfill its promises to depositors in extreme cases. This means you lose all your money.
  • This can happen in case of an economic downturn, when banks (who provide money to large corporations who are unable to repay the amount) ask for a bail-in option.
  • The bank may turn your savings into a fixed deposit without asking you and that too at a lower interest rate and you cannot even challenge it, unless, you challenge the law.
This is the first time that a Bill of this sort has been proposed in India. However, it has happened before in a few countries. A Deccan Chronicle report said a bail-in provision was used in Bank of Cyprus in 2013 which led to a loss of money of half of its depositors who were uninsured (the people who had deposited money over a certain limit).

It is going to challenge the rights of a commoner as ideally, the government should look for money held by big corporations in case of a bail-in but, that won't be the case once this Bill is passed.
 
In cyprus, small investors were protected. Only people hit were the russian oil oligarchs as any deposit upto ~365k euro was safe.

This bill is extreme! It obviously will get challenged in supreme court if it is passed.
 
What if they also try to add it to schedule 9 which will give immunity from legal review? Don't know the nitty-gritty of it though, but a lot of bills (Ex: reservations in exceeding the 50% cap) seem to be getting dumped there to void interference from supreme court.
 
Lord Nemesis said:
What if they also try to add it to schedule 9 which will give immunity from legal review? Don't know the nitty-gritty of it though, but a lot of bills (Ex: reservations in exceeding the 50% cap) seem to be getting dumped there to void interference from supreme court.
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Money bills can't go into schedule 9 afaik! Also anything going into 9th schedule is reviewable by the courts if it infringes on fundamental rights. This could be construed as an attack on right to life!
 
Chaos said:
Money bills can't go into schedule 9 afaik! Also anything going into 9th schedule is reviewable by the courts if it infringes on fundamental rights. This could be construed as an attack on right to life!
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From what I read, any bill could go into schedule 9, but as you said,

The Supreme Court judgment laid that the laws placed under Ninth Schedule after April 24, 1973 shall be open to challenge in court if they violated fundamental rights guaranteed under Article 14, 19, 20 and 21 of the Constitution.
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Basically, the bill can be challenged if it is breaking the basic structure of the constitution by impinging on fundamental rights.

But on the flip side, I am not sure if this will be considered a violation of fundamental rights. Banks always had the ability to void their liability beyond the insured amount (1 Lac currently) when they fold. This bill is allowing them more powers to use customer money as bail-in even before they fold and also void all liability if the regulatory body allows it. What if the govt concedes and allows the insurance amount liability to remain. It would still be equally bad as all money of a customer beyond 1 Lac could be used for a bail-in.

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6pack said:
do co-op banks also come under this?
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Looks like all cooperative banks are also covered under DICGC now. Earlier, they did not used to have the insurance protection. Not sure if this will apply to them.
 
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Can someone post the actual document or from better sites. Of late, one site writes on some article, and voila, all of them say the same thing with some modification.
 
What's really more scary than this bill is the fact that I am finding vocal supporters in favor of it. Its hard to believe that there really are people who believe that such open ended clauses would not be abused and that the govt is too selfless to do that. I really hope that faces behind them are just BJP trolls.
 
Lord Nemesis said:
What's really more scary than this bill is the fact that I am finding vocal supporters in favor of it. Its hard to believe that there really are people who believe that such open ended clauses would not be abused and that the govt is too selfless to do that. I really hope that faces behind them are just BJP trolls.
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Ah that is how you kill the discussion before it is even begun !

Bill is pretty much in the WIP stage I suppose, No clear answers. As usual no clarification from Govt on most Contentious clauses of the bill. Most importantly in current scenario, Bank is entitled to return back only 1L, (Yes Max liability is 1 Lakh) irrespective of the amount that is deposited, in case of bankruptcy. I am sure that 1L figure would have been decided 35 yrs ago , when banks were nationalised (which hasn't been upgraded ) when 1L was a big amount! now it is not. So the Max Liability of the banks has to be at least 1 Crore if it were to be decided as of today.

This Video seems to be discuss it in more evidence based way.

 
drkrack said:
Ah that is how you kill the discussion before it is even begun !
So the Max Liability of the banks has to be at least 1 Crore if it were to be decided as of today.
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Still hopeful?
Don't you remember the day when the entire population was left with 4000Rs in hand (that too not easily) to manage all affairs of their life?
 
Imagine, a retired employee with 30 lakhs pension amount in his account, invested in Fixed deposit SBI bank, ... Suddenly he needs money for surgery he could withdraw pre maturely but banks say they cannot give the money because Some mallaya has caused them losses and they need it for liquidity ..


Dear Govt... https://streamable.com/uxms0
 
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nimod said:
Still hopeful?
Don't you remember the day when the entire population was left with 4000Rs in hand (that too not easily) to manage all affairs of their life?
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I am from a family of Congress Leaders, there are many in family who believe Rahul G to become a great PM, how much more hopeful one can be?

You need to Know Propaganda from both sides before deciding, otherwise it will be like Gauri Lankesh Murder. This is what I received from BJP friends.

1c4a39a408e51f89638b5dad147826bc.jpg


All these years we kept money in the banks with knowing that the maximum liability of the banks is just 1 Lakh isn't it? We don't have any robust bankruptcy laws as well, there was need for a change in the policy. Arun Jaitely recently denied most of the Contentious clauses and apprehension as baseless. So let's see how things turn out.
 
drkrack said:
I am from a family of Congress Leaders, there are many in family who believe Rahul G to become a great PM, how much more hopeful one can be?

You need to Know Propaganda from both sides before deciding, otherwise it will be like Gauri Lankesh Murder. This is what I received from BJP friends.

1c4a39a408e51f89638b5dad147826bc.jpg


All these years we kept money in the banks with knowing that the maximum liability of the banks is just 1 Lakh isn't it? We don't have any robust bankruptcy laws as well, there was need for a change in the policy. Arun Jaitely recently denied most of the Contentious clauses and apprehension as baseless. So let's see how things turn out.
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I am sure, the day Rahul Gandhi will die, BJP supporters will find it difficult to start their arguments.

Peace be upon you and your family.

btw, I am curious to know what's so pity about Guari Lankesh Murder (as indicated by you).

Lets discuss the poster.

1) Don't we have rules/laws prohibiting banks from lending to financially unsound people/companies? there are many rules at the regulator level (RBI) and at the lender's level. Still we have piles of NPAs. I can't imagine which financial teeth RBI is missing? RBI doen't even need permission from cabinet for their regulatory functions.
2) The simple question is: Will the commoners get their own money back in any situation of crisis? I would appreciate a clear answer, no slogans here.
3) Even when the limit is 1L, the commoners were given mere 4K to feed their families for a month that's too not without a struggle outside the banks (though, that was not a financial crisis). That's why I am not hopeful for a secure future. And I asked you if you are still hopeful. I ask again, are you still hopeful?

If you want me to trust Arun Jaitely, then my answer is very clear.
He is incompetent in handling India's finances. This is not his ground.
 
Lmao.

"Beware of propaganda" they say, right beside the photo of dear leader. lol.

First "Fact" is false. If RBI protected interests of depositors, then it would have intervened when kingifsher airlines was deep in red. But it still approved banks to grant additional loans and ultimately kingfisher collapsed. If RBI was that much concerned, we wouldn't have 32$ billion NPAs today.

Second "Fact" They say common deposits are excluded from bill. Then where will they bring money to pump into banks who gave loans to corporations? Thin air? Nope. We tax payers will end up paying for them on or the other

Third "Fact" is unambiguious bullshit

nimod said:
If you want me to trust Arun Jaitely, then my answer is very clear.
He is incompetent in handling India's finances. This is not his ground.
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Thats my worry. Both PM and jaitley are not incompetent. They know exactly what they're doing. He won't give interviews but give lengthy monologues on radio. He won't speak on happening in UP or death threats against leading bollywood actresses and directors. They know exactly what they're doing when they removed the provisions not allowing anonymous donations from corporations.
 
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