Vol. XLI No. 28 July 09, 2017

Financial Resolution and Deposit Insurance Bill 2016: BEFI Opposes Draconian FRDI Bill

THE Bank Employees Federation of India, in a statement issued on the Financial Resolution and Deposit Insurance Bill 2016 (FRDI) cleared by the union cabinet on June 14, 2017, said that this bill is a piece of legislation for overnight closure of banks impelling doom for crores of depositors, not to speak of lakhs of bank employees. The statement was issued on June 29.

Under the FRDI, a “Resolution Corporation” (“Corporation” in short) would be established with only government nominees on its board; the board would have sweeping powers to order amalgamation, merger, liquidation and acquisition of any bank, including the SBI and other nationalised banks, regional rural banks, co-operative banks and payment banks, any insurance company including the LIC and other nationalised general insurance companies and any non-banking financial institution if, in its opinion and judgement, the concerned institution (bank or insurance company) has got “imminent” or “critical” risk to viability. The Corporation will also be authorised to hand over any such institution to another entity – public or private. The Corporation has been authorised to order discontinuation of service of the employees and/or transfer of their employment and/or reduction of their remuneration upon such “Resolution”, ie, amalgamation and/or merger and/or liquidation and/or transfer of ownership.

FRDI envisages forthwith closure of the “Deposit Insurance and Credit Guarantee Corporation” (DICGC) established in 1961, which has so far been an insurance cover for the savings of the depositors; under the FRDI, deposits upto a maximum of Rupees One Lakh only will be returned to each depositor and that too in instalments as per convenience and discretion of the “Resolution Corporation” to be established.

It is accepted that all is not well with the public sector banks (PSBs); most of them are afflicted by bad debts, euphemistically called non-performing assets. Like normal or natural wastage in any business, bad debt is normal incidence in any financial institution like banks. However, in recent years, the unholy nexus between the unscrupulous corporates, top echelons of banks and a section of political bosses has successfully raised the level of NPAs by alarming proportions; the rate of growth of NPAs has increased several folds after the present NDA government assumed power at the centre. Of the total NPA portfolios of PSBs as at present, 88.4 per cent is the creation of the large corporate borrowers with the loan exposure of or above Rs 5 crores each;  of which, 25 per cent is accounted for by  12 large borrowers.

The present BJP government has no political will to recover the NPAs from the defaulting corporates; instead, it is more interested to accommodate and patronise the defaulters through various measures like loan-restructuring, assets-reconstruction, even write offs and outright  loan-waiver. Thereby it attempts to show the performance of the PSBs in poor light and then liquidate them through the new bill.

The draconian nature of the bill and its impact on the safety and security of people’s deposits as also that on the emoluments and the very job security of the employees is apparent and manifest on the face of it; but the most dangerous consequence is that it will take out the issue of existence or liquidation of a PSB from the domain of public debate and leave it to the whims of bureaucratic dictates. BEFI apprehends that the process of legislating it will be speeded up after the ensuing presidential election.

BEFI condemns the move of the central government in most unambiguous and unequivocal terms and calls upon the entire bank employees’ fraternity to rise with rock solid unity, determination, courage and conviction against the anti-national FRDI.  

United Forum of Bank Unions’ (UFBU) meeting held in Mumbai on June 28, took a serious note of this and other similar moves of the central government aimed at merger and privatisation of PSBs and decided to observe all India bank strike on August 22 to be followed by a massive dharna at Delhi on September 15 and two-day strike in October/November this year.

BEFI also makes an appeal to all democratic forces and people of the country to raise their voice high to resist legislation of such a draconian law.