• Sunday, December 17, 2017

Modi government's FRDI bill may take away all your hard-earned money

Discussion in 'Central & South Asia' started by ashok321, Dec 7, 2017.

  1. ashok321

    ashok321 ELITE MEMBER

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    Modi government's FRDI bill may take away all your hard-earned mo


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    Financial Resolution and Deposit Insurance Bill, 2017 is the new bomb that may be dropped on commoners by the Modi government.

    What is this bill all about and how is it going to affect you?

    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.

    It would not be an exaggeration to say that if this Bill is passed in the Parliament, the depositors' rights may go down the drain, that is if the bank is going down the drain.






     
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  2. ashok321

    ashok321 ELITE MEMBER

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    The idea is to bail out Mallyas of India at commoner's expenses.

    Bhugto bhakto!

     
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  3. Sharky

    Sharky FULL MEMBER

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    In the existing law, we are only protected up til 1 lakh anyway. Who the Heck cares if they take that as well. OTOH in order to entice citizens to not hoard black money they should actually incentivize bank deposits. This is detrimental.
     
    Last edited: Dec 7, 2017
  4. baajey

    baajey SENIOR MEMBER

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    SAD to see modi is turning into yet another oligarch (allegiance to the ones in nagpur)
     
  5. pothead

    pothead FULL MEMBER

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    Bhaaaaaaago CHOR bhaaaago :D
    CHOR CHOR CHOR...crying all over India.
     
  6. baajey

    baajey SENIOR MEMBER

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    tbh, something similar, albeit distantly, is already in place from times immemorial.....flexible rate of interest.
     
  7. Straight Razor

    Straight Razor FULL MEMBER

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    How? Please explain. Are you refering to Floating rate of interest on loans?
     
  8. ashok321

    ashok321 ELITE MEMBER

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    Last edited: Dec 7, 2017
  9. xyxmt

    xyxmt ELITE MEMBER

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    First mitra robot and now this, India is going places for sure
     
  10. rott

    rott SENIOR MEMBER

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  11. ashok321

    ashok321 ELITE MEMBER

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    That matter is in the Supreme Court of India.
    He was involved with a girl.
    Lot of things would unfold, once the case moves forward.
     
  12. ashok321

    ashok321 ELITE MEMBER

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  13. AndrewJin

    AndrewJin ELITE MEMBER

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    This virgin man has zero clue about financial systems and economy