India is a country where majority of the population depends upon saving and bank deposits to help them in any sort of financial emergency. It is these deposits which make them feel safer and make them feel at ease. Government is planning to introduce a new FRDI Bill (Financial Resolution and Deposit Insurance Bill) which on first sight does not seems to go too well with the depositors money.
FRDI bill might be proposed in the upcoming parliament session. This bill might pose a threat to money deposited by 63% of Indian population in public sector banks. FRDI bill aims to set up a Resolution Corporation (RC) that insures bank deposits. RC is a committee of 11 officials which will include around 6 people appointed either from the government or by the government which essentially means that government will have its indirect control on the RC.
The rule which is currently in implementation was brought way back in 1962 which insures a return of at least 1 lakh in case the financial institution is not able to pay back all the deposited money to depositors. After the implementation of the bill Government will decide amount of money to be returned and the form in which it will be returned to the depositor in case of financial breakdown of the institution. The amount involved is called bail-in.
This is the reason why this bill is creating some news and this perhaps being only one of the clause is already creating terror in the mind of depositors and common people with bank accounts.