The Government is proposing a Bill by which if the bank is having financial difficulties then they can ask depositors to take a hit.
The Finance Ministry have got a Bill approved by the Cabinet called
“The Financial Resolution and Deposit Insurance (FRDI) Bill, 2017” and this has now been referred to a Joint Parliamentary Committee before getting it passed in the Parliament.
This Bill introduces the provision for a “bail-in”, whose purpose is to provide capital to absorb the losses of a bank and ensure its survival. Here, survival does not mean safety of depositors’ money, but restoration of capital of the bank.
The bail-in empowers the bank to cancel a liability owed by the bank or change the form of an existing liability to another security.
In simple words, it means that your savings account balance of Rs.15 lacs, can be reduced to Rs.1 lac, which is mandatory by law.
** OR they can convert your savings account balance of Rs.15 lacs to a Fixed Deposit, repayable after 5 years, giving you of 5% annual interest.**
And you can do nothing about it.
View this link, to know more. http://www.thehindu.com/opinion/op-ed/banking-on-legislation/article20005363.ece
To recover the money from the defaulters, there is no attempt so far by the Reserve Bank of India to blacklist these entities from getting further loans or prevent their managements from retaining a majority equity stake, as penalty for the huge haircuts (writing off loans) being taken by banks.
In a nut-shell they are now trying to shift the responsibility of rescuing the “sinking banks” from the Govt. to the Suppliers & Depositors of the Bank.
Trust in Banking Industry would be decimated. People would gradually close all their bank accounts and keep their cash under the bed.
Share this extensively thru’ every social media. This bill should not be allowed to become an act.