The recent commentary around the Financial Resolution and Deposit Insurance (FRDI) Bill that is up for debate in the winter session of the Indian Parliament has picked up on one section (section 52) of the Bill, ignoring everything else in the 125 pages, and has resulted in panic about the safety of bank deposits if this bill gets passed. The FRDI Bill seeks to put in place a new entity called the Resolution Corporation (RC) that will put in place a system to monitor financial firms such as banks, insurance companies, stock exchanges, and payment systems, so that the ill health of such a firm can be caught early on. As taxpayers, we should worry about the impact of bail-outs that happen when financial firms fail without a process in place, on how our taxes are being used to pay for the inefficiency of banks that made loans they cannot recover. A well-defined system that makes banks more accountable and gives an early warning of ill health is progress, without exposing our deposits to more risk than they face today is progress, isn’t it?

(Live Mint)