Financial Resolution and Deposit Insurance (FRDI)
The proposed FRDI Bill will make the recovery of Indian economy impossible
December 2, 2017
A Critique of Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 titled ‘Wrong Diagnosis, Harmful Prescription’ jointly published by AIBOC, NAPM, NTUI and Centre for Financial Accountability (CFA) was released at the meeting.
Speaking at the occasion legal
scholar, Dr Usha Ramanathan said that the major economic decisions are
taken without any consultation or public debate. Referring to the
mandatory and forced use of UID for all financial transactions she said,
“extraordinary ambitions of the technology makers are putting the
monetary system of this country under brutal attack.”
Thomas Franco, General Secretary of
AIBOC, said that the bill would have an adverse impact on the common
people, who deposit money at the Bank to earn interest. Moreover, the
bill provides for a cap on the withdrawal as a measure for the banks to
increase the spending and bridge the losses caused by faulty lending.
Drawing attention to the recovery
rate of the National Company Law Tribunal, he mentioned that in the
first case of insolvency, the recovery rate was just six percent. He
asked for the need the to fix the accountability of the Bank’s
management, RBI representatives, and Finance Ministry representatives in
the case of defaults.
Economist Meera Nangia drew the
attention of the audience on the steep haircuts, which causes loss to
the public and the capability of all 22 Asset Reconciliation Companies,
which have a capital of Rs 100 crore each as capital. She asked, “How
will they deal with the total NPA, which by government’s conservative
estimates if of over 8 lakh crore?”
The Public sector as a whole and
specifically the banking sector is on the brink of an overhaul,
Madhuresh Kumar, National Convenor of NAPM said. He added that the
privatisation of banks has been one of the coveted goals of
liberalisation policies, but has been resisted by the bank employees and
progressive people in general. Despite this, there has been a concerted
effort to privatise public sector bank over the decades. This time, the
government is using the NPA crisis to further the agenda of
privatisation.
The proposed Bill seeks to destroy
the value of the industries, which are assets of the society and not
only of the promoters. Mody said. The Asset Resolution Companies will
take away the value of these assets by breaking up the company and
selling it in parts. The Bill doesn’t seek to punish the promoters, who
followed the wrong policies.
Background:
Attempts to privatise the public
sector banks have been ongoing since the economic reforms. The current
crisis with the rising NPAs in the banking sector is being used as
another opportunity to overhaul the banking system. With years of
propaganda of an inefficient public sector, a climate of disinvestment
is only perfect to liquidate any public sector financial institution!
Hence what we are facing today is not just an NPA crisis is a conscious
effort to reverse the nationalisation of banks and to end public sector.
The combination of merging small
banks to create a few ‘lending giants’ along with the introduction of
payment banks is a perfect way to end brick and mortar branches. The
proposals of ‘haircuts’ (a fancy term for write-offs,) the policy of
demonetisation, evergreening of loans, selling bad loans at a pittance
to asset reconstruction companies are all measures that would further
weaken the public sector banks. A slew of legislation on banking
sector, in the form of, the Insolvency and Bankruptcy Code (IBC), 2016,
the Banking Regulation (Amendment) Ordinance, 2017 and the Financial
Resolution and Deposit Insurance (FRDI) Bill, 2017 were introduced in
haste and without a debate in order to make the PSBs weak and
subservient. Particularly the FRDI puts most of the PSBs under the
threat of being liquidated.
Banks apart, the entire public
sector is facing disinvestment, privatisation, and selling of assets and
resources in the name of cutting losses. It is vital for all
progressive sections of the society, cutting across political
affiliations to come together in building a rock-solid resistance.
Link of Wrong Diagnosis, Harmful Prescription: A Critique of Financial Resolution and Deposit Insurance (FRDI) Bill, 2017:
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