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Do Bank Depositors Need To Worry about FRDI?
A WhatsApp message (provocatively titled “This Tsunami will wipe out your money lying in the Banks” and ostensibly written by a chartered accountant) is going viral with a link to an article in The Hindu, which suggests that our bank deposits are no longer safe; they can be appropriated by the government and converted into equity to bail out banks. The culprit is, apparently, a ‘bail-in’ clause in the FRDI Bill that allows the government to convert your deposits into equity in order to recapitalise and bail out banks that are facing bankruptcy.
Depositors, who have gone through enormous hardships to access their own savings during the currency demonetisation of 2016, find it is easy to believe that the government may appropriate their hard-earned savings to bailout banks. Most Indians hold the bulk of their savings in property or bank deposits and there is already a gnawing worry over the government’s inability to deal with the mammoth bad loans of banks, which are in excess of Rs10 lakh crore. So, let’s examine whether we really need to panic.