The Bill when enacted will pave the way for setting up of the Resolution Corporation
It is not the job of regulators to ensure that users make profits. It is not the job of regulators to prevent people from making losses. It is not the job of regulators to prevent people from doing stupid things, argues Ajay Shah.
'The hour is very late, and the choice between triumph and tragedy knocks at our door,' says Ajay Shah.
A proposal to withdraw the bill was moved by Minister of State for Finance Pon Radhakrishnan and was approved by the House
Mutual funds, bonds, PPFs, equity and real estate are some options which offer varying rates of return.
The government would be ironing out issues related to the controversial 'bail-in' clause in the earlier Bill, explore hiking the deposit insurance cover of customers, and decide whether the resolution framework should apply to public sector banks.
The provisions in the FRDI bill do not modify current protections for depositors adversely at all, the ministry held, maintaining that these rather provide additional protections in a more transparent manner.
The system envisaged under the FRDI Bill, if implemented properly, would help improve the efficiency of capital allocation without harming consumers, and without risking the stability of financial firms, says Ajay Shah.
Will the Financial Resolution and Deposit Insurance Bill endanger our bank deposits?
'Clearly, the depositors of cooperative banks need the maximum protection.'
A way out of the economic slump is to revisit the template of 15 years ago and follow its constituents, recommends Ajay Shah.
The finance ministry has put out a revised draft in public domain.
'The quick fixes have failed; there is now no alternative to deeper reforms,' says Ajay Shah.
The Financial Sector Legislative Reforms Commission, chaired by Justice B N Srikrishna, has suggested a non-sectoral, principle-based approach to revamp the existing framework.
'We are all in a tizzy about NBFCs in the aftermath of the IL&FS default.' 'We tend to jump to the notion that an NBFC is like a bank. But banks make a promise that deposits are liquid and have an assured return.' 'NBFCs make no such promises,' points out Ajay Shah.
What is required from government is intellectual framework.
US President Barack Obama on Sunday affirmed his commitment to enhancing India's 'voice and vote' in global financial institutions like IMF.
India needs a place where all regulators could gather and function as in a war room.
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Stating that there are strong inter-linkages between banks, NBFCs and other deposit-taking entities, he said for monetary policy to be effective and financial markets to remain stable, they should be regulated by the central bank.
A long crisis with a lack of sound short-term, long-term actions can result in sluggish growth in India, similar to that in Japan.
The three main regulators have different approaches to grievance redressal and different standards to stop harmful from coming pitched at the consumer.
The government has provided a long-term vision.
This is the joint statement issued by the ministry of external affairs on the visit of US President Barack Obama to India.
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