Lok Sabha Question No. 343 (STARRED), answered on 2022-03-28
Subject: Insurance for Bank Deposits
Ministry: FINANCE
Asked by: P. Velusamy, K. Shanmuga Sundaram

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA STARRED QUESTION NO. *343

ANSWERED ON - MONDAY, MARCH 28, 2022/ CHAITRA 7, 1944 (Saka)

## INSURANCE FOR BANK DEPOSITS

*343.  SHRI VELUSAMY P.: SHRI SHANMUGA SUNDARAM K.: Will the Minister of FINANCE be pleased to state: (a)  whether  the  Financial  Resolution  and  Deposit  Insurance  Bill  which  was  withdrawn  in 2018 due to its controversial provision of bail-in that was perceived as undermining safety of depositors is being contemplated and if so, the details thereof; (b) whether the Government is having any consultation with the Reserve Bank of India for drafting fresh legislation to deal with the financial firm's insolvency; (c)  if  so,  the  details  thereof  along  with  the  steps  taken  by  the  Ministry  to  secure  the interest/safety of the depositors; (d) whether the Government is having any proposal to bring a comprehensive legislation to deal with the Non-Banking Financial Companies; and (e) if so, the details thereof and if not, the reasons therefor?

## ANSWER

## MINISTER OF FINANCE (SMT. NIRMALA SITHARAMAN)

(a) to (e): A statement is laid on the Table of the House.

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## STATEMENT REFERRED TO IN REPLY TO PARTS (A) TO (E) OF LOK SABHA STARRED QUESTION NO. 343 FOR 28.03.2022 RAISED BY SHRI VELUSAMY P. AND SHRI SHANMUGA SUNDARAM K. REGARDING 'INSURANCE FOR BANK DEPOSITS'

(a) to (c): The Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill) was introduced in Lok Sabha in August, 2017 and thereafter was referred to the Joint Committee of Parliament for examination and report thereon. The main objective of the FRDI Bill was to create a specialised resolution mechanism for select financial sector entities. The Government had withdrawn the FRDI Bill in August, 2018 for further comprehensive examination and reconsideration of the subject. The Government has not taken a decision to bring a new law to provide for a legal framework for resolution of financial firms.

With a view to provide a greater measure of protection to depositors in banks the Deposit Insurance and Credit Guarantee Corporation (DICGC) has raised the limit of insurance cover for depositors in insured banks from the level of ₹ 1 lakh to ₹ 5 lakh per depositor with effect from February 4, 2020 with the approval of Government of India. Further, the DICGC Act, 1961 was amended in August, 2021 with a view to address concerns about difficulties faced by  depositors  from  accessing  their  own  deposits  due  to  imposition  of  restrictions  on withdrawal of deposits placed by the Reserve Bank of India and provide that depositors can get  easy  and  time-bound  access  to  their  deposits  to  the  extent  of  deposit  insurance  cover through interim payments by DICGC.

(d)  and  (e):    The  Government  has  already  notified  the  Insolvency  and  Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 ('Rules') on November 15, 2019 to provide a generic framework  for  insolvency  and  liquidation  proceedings  of  systemically  important  Financial Service Providers (FSPs) other than banks. Subsequently, the Government has also notified vide  Notification  dated  November  18,  2019,  that  the  insolvency  resolution  and  liquidation proceedings of the Non-Banking Finance Companies (including housing finance companies) with asset size of Rs.500 crore or more shall be undertaken in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016). Accordingly, the framework to deal with the select Non-Banking Finance Companies is already in place under IBC, 2016.

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