Dispel paranoia

DEPOSITORS across the land are nervous that a proposed law would force them to lose their lifetime savings if their banks turn insolvent. The government has an obligation to allay such fears; it is a sacred obligation after it subjected millions of citizens to its extraordinary demonetisation drive to bring home an idea that the bank, and not the home, is the right place to keep one’s legitimate money. The unprecedented crusade against black money had forced millions of Indian women to disclose their meagre “kitchen savings”, which finally landed into the banks. Hence, it is the moral duty of the Modi government to ensure that rightful savings of citizens are fully protected in case a bank goes down under. Secured creditors, who lend money against collaterals, easily get their money back in case of a default.  But, millions of savings accounts holders have deposited their lifetime savings in banks without any collateral. They do so because they have trust in the robustness of Indian banks under the watchful eyes of the government. Hence, the government simply can’t shrug off its responsibility by enacting a legislation. 

 FM Jaitley has done well to assure that the proposed legislation — the Financial Resolution and Deposit Insurance (FRDI) Bill — will fully protect the public’s deposits in banks and financial institutions. But, the depositors’ confidence and national economy are not guided by the basis of FM’s newspaper assurances, TV sound bites or tweets. There are recent instances when people endured policy reprisals despite assurances from high offices of FM and PM. For instance, the Aadhaar identity. Earlier, it was assured to remain a tool to ensure efficient delivery of subsidies. Today, it is an all-pervasive instrument — people rush to get Aadhaar of the newborn even before finalising a suitable name for the child.    

 The sore point of the proposed legislation is the “bail-in” clause, whereby, depositors’ money would be used to salvage a rogue bank. At present, taxpayers do such “bailouts”. Let’s maintain the status quo if the government believes that there is no fundamental difference between the present and the proposed law. Public trust is the very basis of PM Modi’s digital India; don’t dent it by such frivolous legislation.