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Friday, December 29, 2017

Shaking our Faith ?

  1. Thomas Franco, Secretary of the All India Bank Officers' Confederation says in a discussion that the Parliamentary Standing Committee on Finance submitted a report on Non-Performing Assets (NPAs) in Feb 2016, on which not much has been done. He adds that the large defaulters number just 7-800, the results of whose actions are sought to be displaced by the FRDI Bill on the 100 crore population of India who have links to the banking system.
  2. Franco adds that it is for the first time a liquidation clause is being brought in. So far the banking public has believed that the banks in India have sovereign guarantee and wont be liquidated. Uptill now in the history of independent India, there was no question in anyone's mind that entities such as the State Bank of India or the Life Insurance Corporation could or would ever be liquidated. As it wont actually be possible to liquidate any of the large Govt.-owned financial entities which underpin so much of the economic life in India, this bill may be used to instead handover some of them to the private sector. Some of the large defaulters of bad loans from the public sector have been looking for an opportunity to take over these banks, he says. 
  3. Chakrabarty, Former Deputy Governor, RBI clarifies that the FRDI Bill was envisaged in the context of banks that operate in a multi country environment as that makes resolution of its financial distress tougher. My own take is that the country where that Bank is headquartered is primarily responsible for the administration of that Bank should its internal arrangements prove inadequate, and not depositors, whether they reside in the home country or elsewhere. 
  4. In another discussion, former RBI Governor Reddy says that if no bank has been allowed to fail after nationalization of public sector banks, why is the FRDI bill needed at all ?
More readings on the context of the FRDI Bill :


1.     http://www.moneylife.in/article/bail-in-clause-of-the-frdi-billmdashis-its-constitutional-validity-suspect/52498.html

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