[I/II. What is, disturbingly, missing is the need to strenghteh the role of the "regulator", the RBI in the instant case, so as to ensure that the NPAs, the unrecoverable loans - mainly, but not exclusively, to corporates, do not keep piling up.
The defining element of the Bill is that it proposes to replace "bail out", by the state, with "bail-in", at the cost of the common depositors. In fact, even today, deposits only up to Rs. 1 lakh are insured. So, in case of trouble, the banks are legally "free" to misappropriate these uninsured amounts. Or resort to "bail-in", so to say. But at least in case of the PSBs, the government was, and still is, an implicit gurantor (that it'd "bail-out", if needed). The proposed formation of a 'Resolution Corporation", under this Bill, will rid the state of its (implicit) resposnsibility to rescue any bank, the PSBs in specific, in case of financial trouble. Apart from grievously affecting the interests of the common depositors, it'd also seriously undermine the public confidence in the banking system, the PSBs in particular. So, the banking business itself would be affected. Once a bank resorts to "bail-in", one can't expect people to continue to keep faith in that bank. Even a rumour of an impending "bail-in" could ruin a bank. In 2008, the GoI and the RBI had intervened to restore depositors' confidence in the largest private sector bank in India, viz. the ICICI. (Ref.: < https://www.thecasecentre.org/programmeAdmin/products/view&&id=121031>.) That scenario is now going to change. We're, in effect, set to go back to the pre-nationalisation days. Never mind the new jargons. So, the Bill is either just a pig-headed scheme or a mere ploy to force people to keep faith in various non-governmental financial instruments or a combination of both. (One may also look up: < http://www.thehindu.com/business/Economy/what-does-the-frdi-bill-do-for-you/article21386264.ece> and < http://www.thehindubusinessline.com/money-and-banking/frdi-bill-bank-union-contemplates-strike-action/article9989991.ece >.) II. And, another relevant piece of info: ***Gross NPAs (Non-Performing Assets – bad unrecoverable loans, mostly lent to large corporates) of the Public Sector Banks (PSBs), under the watch of the incumbent regime, rose from Rs. 234,583 crore, in June 2014, to Rs. 733,136 crore, in June 2017. A more than three-fold rise, over a period of three years.*** (Ref.: The Chart, 'PSBs Gross NPAs in Rs cr', at < http://www.firstpost.com/business/bad-loans-of-indian-banks-cross-rs-800000-cr-banking-mess-explained-in-7-charts-3939999.html >.)] https://www.ndtv.com/india-news/dont-believe-rumour-bank-deposits-safe-says-pm-modi-on-bail-in-worries-1787362 Congress Government Forced Banks To Lend To A Few Industrialists, Says PM Modi Opposition parties have alleged that the government could use people's money to save financial institutions that have made bad lending calls. Banks are struggling under a bad-loan burden of around Rs. 10 lakh crore ($150 billion). All India | Edited by Anuj Pant | Updated: December 14, 2017 07:41 IST Congress Government Forced Banks To Lend To A Few Industrialists, Says PM Modi Click to Play PM Modi's assurance comes as a huge controversy rages over the "bail-in" provision NEW DELHI: Prime Minister Narendra Modi has assured people that their bank deposits will be safe and that their interests will not be harmed in any way, amid worries over what is being called a "bail-in" provision in a new proposed banking law. PM Modi described them as rumours and asserted that the proposed Financial Resolution and Deposit Insurance (FRDI) Bill seeks to strengthen the banking system. "The government is trying to strengthen the banking system by policy initiatives on a daily basis. But social media rumours are being spread about the FRDI Bill, which is completely opposite to the reality. We are trying to protect the depositors interest and the banks as well," PM Modi said in an address at industry body FICCI, a day before key state Gujarat votes in the second and last phase of assembly elections. The Prime Minister's assurance comes as a huge controversy rages over the "bail-in" provision, under which banks will be allowed to forfeit a major portion of deposits made by account holders in case of a financial crisis. Opposition parties have alleged that the government could use people's money to save financial institutions that have made bad lending calls. Banks are struggling under a bad-loan burden of around Rs. 10 lakh crore ($150 billion). PM Modi said his government has inherited a "completely spoilt banking system" from the previous Congress-led UPA government. He said the biggest liability passed on by the previous government was non-performing assets (NPA). The last government, the PM alleged, forced banks to lend to influential industrialists, which exacerbated the NPA situation. "Commonwealth scam, 2G scam and Coal scam, and the biggest scam - the banking scam - all happened during UPA regime," the Prime Minister said. Some financial analysts have suggested that a "bail-in", as against a bailout in which outside money is used to save a financial institution, may eat into funds parked by depositors. An online petition last week appealed against allowing "a government entity to use depositors' money to save a bank on the verge of bankruptcy" and said to Finance Minister Arun Jaitley, "Our hard earned money that we have saved for our children and for our future will be used to bail-in the banks." It got over 40,000 sign-ups in just 24 hours. Mr Jaitley has already sought to allay concerns multiple times, saying the government will fully protect public deposits in banks and on Tuesday even hinted that the government is open to changes in the proposed bill, currently being reviewed by a parliamentary panel. The Finance Minister has said that the government's massive Rs. 2.11 lakh crore capital infusion plan for banks will strengthen them and there is no question of any lender failing. If it happened, he promised, the government would step in to "fully protect" the deposits made by customers, he said adding that "the government is very clear about it". The Bill was first introduced in the Lok Sabha in August this year during the monsoon session and was referred to a joint parliamentary committee. -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. 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