NEW DELHI: Several messages against the bail-in provision in the FRDI bill have gone viral on social media seeking public support against what is termed as an attempt to "allow a government entity to use depositors' money to save a bank on the verge of bankruptcy".
Even an online petition has got thousands of signatures against the proposed bill.
The petition was started by a Mumbai-based individual, Shilpa Shree, with a single signature and has got over 40,000 signups within 24 hours, supporting her appeal to Finance Minister Arun Jaitley to not let this bill pass with the 'bail-in' provision.
"Our hard earned money that we have saved for our children and for our future will be used to bail-in the banks," the petitioner said.
"This bill gives power to a government entity to use depositors money to save a bank on the verge of bankruptcy. This government entity can declare the bank doesn't owe you any money though you have deposited your hard earned money with it," the petition said.
However, experts said that the FRDI bill is depositor friendly and provides more protection to them compared to existing provisions.
"In present scenario, if a bank gets insolvent and there's no governmnet intervention then people don't get much protection. In FDRI there are many interime provisions to give people that protection," Dheerendra Kumar, CEO, Value Research said.
It's a change for betterment, he said.
Meanwhile, the Finance Ministry said the provisions in the FRDI Bill do not modify current protections for depositors adversely at all and that these rather provide additional protections in a more transparent manner.
"The FRDI Bill is far more depositor friendly than many other jurisdictions, which provide for statutory bail-in, where consent of creditors or depositors is not required for bail-in," the ministry said in a statement.
"The FRDI Bill does not propose in any way to limit the scope of powers for the government to extend financing and resolution support to banks, including public sector banks. The government's implicit guarantee for public sector banks remains unaffected," it said.
The government further said Indian banks have adequate capital and are also under prudent regulation and supervision to ensure safety and soundness as well as systemic stability. The existing laws ensure integrity, security and safety of the banking system.
In India, it said all possible steps and policy measures are taken to prevent failure of banks and protection of interests of depositors through issue of directions/prompt corrective action measures, capital adequacy and prudential norms.
The FRDI Bill will "strengthen" the system by adding a comprehensive resolution regime which will help ensure that, in the rare event of failure of a financial service provider, "there is a system of quick, orderly and efficient resolution in favour of depositors", the statement said.
(With inputs from PTI)
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