Contentious Bill on financial resolution deferred

The controversial Financial Resolution and Deposit Insurance (FRDI) Bill, which was to be tabled in Parliament in the ongoing winter session, has been deferred till the Budget session. The move was necessitated as the joint parliamentary committee which is vetting the Bill, has not yet given its report on it.

The draft law was introduced in the Lok Sabha in August. The Bill provides a comprehensive resolution framework to deal with bankruptcy situations in financial entities such as banks and insurance companies.

The Bill, however, came under attack for one of its clauses which allows use of depositors' money to help failing financial institutions to stay afloat.

A provision in the Bill called 'bail-in' allows the Resolution Commission to be set up to raise funds internally and use it in case of such exigencies.

This is a new provision for rescuing financial firms from their failure. So far, Indians were used to the 'bail-out' concept which allowed external help to a failing bank such as takeover.