The economic research department of State Bank of India, SBI Ecowrap, cleared the confusion on the proposed Financial Resolution and Deposit Insurance (FRDI) Bill. According to the SBI Ecowrap report, the proposed Financial Resolution and Deposit Insurance (FRDI) Bill seeks to establish a ‘Resolution Corporation’ to monitor financial firms (along with regulators), and resolve them in case of failure.
'The resolution methods of FRDI Bill which spread confusion among depositors is the ‘bail-in’ clause, where the financial firms/companies issue securities in lieu of the money deposited,' the report said, adding that 'in case the firm’s financial situation deteriorates, deposits could be converted into securities such as shares in the bank.' Currently, DICGC provides deposit insurance of up to Rs 1 lakh and rest of amount is forfeited in the rare event of a bank failure. Data on Cross Country Deposit insurance Coverage limit shows that Deposit insurance coverage in India is one of the lowest at Rs 1 lakh / $1508 / 0.9 times India’s per capita income. Even if we apply the average of how many times it is of per capita income across countries, the deposit insurance coverage rises to Rs 3.5 lakh.
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