Now, it is time to know as to what a Financial Resolution and Deposit Insurance Bill 2017 (FRDI 2017) mean and its implications.

The Union Cabinet has passed the FRDI bill 2017, which is to be introduced in the Parliament.  This is something similar to the Bankruptcy Code 2016, which was passed last year.  However, the insolvency code Act deals with companies in all the sectors, whereas the FRDI 2017 bill deals specially with the companies in the financial sector (viz Banking and Insurance).  Now let us see its special features.

  1. This bill is introduced to fill the gap that exists in respect of bankruptcy of financial firms.
  2. A committee appointed for the purpose, which contained representatives from financial sector regulatory authorities and DICGC submitted its report and based on this FRDI was formulated.
  3. This bill is expected to protect customers of financial service providers during financial difficulties.
  4. Also, a strict discipline will be brought on the financial service providers, in case of a crisis arising therein, by restricting the financial assistance extended out of the public money.
  5. The bill is expected to bring a financial stability, in the country’s economy, through various preventive steps, and steps to be taken during the period of catastrophe.
  6. Retail depositors’ interest will be protected, through the process of streamlining the DICGC structure.
  7. A proposal to bring down the time and costs involved in resolving distressed financial bodies.

It is hoped that once this starts working, stability and resilience of different units of financial sector will be assured.

Comments ( 10 )


    Has it anything to do with the re organising (merger) of public sector banks?

    • Admin Bankedge

      Yes. It relates to the concept of merger in general. As is known, depositors are protected to the maximum extent of Rs. 1 lac on deposits kept with any bank and there would thus be inhibitions in their mind about a bank being liquidated and closed.

      To remove such fear, this bill viz Financial Resolution and Deposit Insurance Boill 2017 (FRDI 2017) is passed. This is done with the recommendations of a committee membered by representatives from financial institutions and DICGC. In the event of a bank or a financial institution going in to Bankruptcy, the bills assures of their protection through mergers or acquisitions.

  • Debaditya

    Does it pose a threat to bankers ?

    • Admin Bankedge

      Remarks about salaries paid to PSU employees are only on papers, and the settlements on wage revisions are happening at regular intervals. No heed should be given to such statements.

  • Vinod Jangra


    Through various channels we are hearing these news that after passing this bill govt can sack any employee even with day notice and it also elaborate about the salaries paid to the psb employees. Kindly guide in revert in this regard.

    • Admin Bankedge

      FRDI bill is primarily meant to bring discipline in the banks’ lending system. The mounting NPAs and the stressed assets, has compelled the Government and the RBI to bring some financial discipline in the system. One such thing is introduction of Bankruptcy Bill which declares certain identified accounts as Bankrupts. However, Government also has brought in certain other items under the purview of this bill, which proposes to bring some discipline amongst bankers, more so in respect of staff accountability which is in a vague form at present.

      Also, Trade Unions which were encouraged to protect the staff interest, were holding an upper hand in PSU banks, and over a period became less effective, due to its protests against Computerization and other developmental activities. The statements like “any employee can be retrenched or dismissed without notice etc”., are only to bring a discipline in the employees’ minds and a good and sincere worker can never be victimized.

  • Dr Meera Nangia

    I think you are rather ill informed and misleading the public

    • Admin Bankedge

      Hi Dr. Meera Nangia,

      The FRDI 2017 is one which is approved by the Government and passed in the interest of the customers of financial sectors. The original Government notification reads as under:

      What the Bill offers
      1. According to the finance ministry, FRDI Bill, 2017 seeks to protect customers of financial service providers in times of financial distress.

      2. It also aims to inculcate discipline among financial service providers in the event of financial crises, by limiting the use of public money to bail out distressed entities.

      3. The Bill would help in maintaining financial stability in the economy by ensuring adequate preventive measures, while at the same time providing the necessary instruments for dealing with crisis events.

      4. The Bill aims to strengthen and streamline the current framework of deposit insurance for the benefit of retail depositors.

      5. Further, it seeks to decrease the time and costs involved in resolving distressed financial entities.

      6. Once enacted, a resolution corporation will be setup to strengthen the stability and resilience of the entities in the financial sector.

      The purpose of the bill is in similar line with the bankruptcy code. This will ensure that the Corporation to be set up would work towards stability of the entities in the financial sector. Precisely, a better discipline will be brought on the Financial Sectors and also the DICGC guidelines will be modified accordingly. Please go through the Government guidelines in detail for further clarification.

  • Dr. Prateek Sharma

    How will this bill be impacting the Public sector general insurance companies in a broader manner?

    • Admin Bankedge

      Hi Dr. Prateek Sharama,

      Mainly the worries daunting the public is about the deposits kept with the banks, which they are afraid might be blocked, if the bill is passed. However, these inhibitions have been wiped out by the Finance Minister’s comments, that the FRDI model would be different from that related to other countries and customers’ interest will be the utmost as far as our Depositors are concerned.

      Referring to the Insurance sector, this would hardly affect the insured, since premiums are paid to cover a risk. Also, if no claim being made the amount would be paid on maturity. Failure of an Insurance sector cannot be attributed to non-recovery of dues, as in the case of Banking sectors, where the main concern is on account of NPAs, which are not recovered. This ultimately results in banks’ loss, and capital erosion. Hence, such fear of FRDI bill affecting the Insurance sector should possibly be a myth.

      Hope this clarifies the issue.

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