Financial Resolution and Deposit Insurance (FRDI) Bill
Part of: Prelims and GS-III -Economy
Context: In order to deal with insolvency of firms in the financial sector, the Finance Ministry has recently sought views of the Reserve Bank of India (RBI) on drafting a modified version of the Financial Resolution and Deposit Insurance (FRDI) Bill which was withdrawn in 2018.
The bill was meant to address the issue of insolvency of firms in the financial sector with the least disruption to the system and other stakeholders.
The Bill was withdrawn due to concerns among the public over safety of deposits despite assurances by the Central government.
A key point of criticism was the so-called bail-in clause in the Bill that said in case of insolvency in a bank, the depositors will have to bear a part of the cost of the resolution by a corresponding reduction in their claims.
Now under a modified version, in order to allay fears of depositors the deposit insurance cover has also been raised to Rs 5 lakh from Rs 1 lakh per account.
