The Government has decided to withdraw the controversial FRDI Bill and has informed about it to the Chairman of the Parliamentary panel examining the proposed legislation. Trinamool Congress leader Saugata Ray said in the lok Sabha on Tuesday that Finance Minister Piyush Goyal has written to the Chairman of the Joint Parliamentary Committee, saying the Government has decided to withdraw the Financial Resolution and Deposit Insurance (FRDI) Bill.
The FRDI Bill, introduced in the lok Sabha, on August 11 last year, had a ‘bail-in’ clause, which some experts said had the potential to harm deposits in savings bank accounts. Amid concerns, the Government had then referred the bill to a Joint Parliamentary Committee headed by BJP’s Bhupendra Yadav. The ‘bail-in’ clause was included in the Bill as one of the tools for resolution for bank failure. It provides for depositors to bear a part of the cost of the resolution by corresponding reduction in their claims. This provision had raised concerns that deposits could be used to bail out the failing banks.
It also provided for raising the security cover for bank deposits. At present, each depositor is protected only up to Rs 1 lakh by the Deposit Insurance and Credit Guarantee. later, during the debate on amendment to Insolvency Bill, which was passed by the lok Sabha, the Opposition attacked the Government for trying to benefit a particular corporate by seeking to amend the insolvency and bankruptcy code, dubbing the Bill on the issue as “tainted” and demanding that it be referred to a Standing Committee.
However, the Government said the amendments to the Insolvency and Bankruptcy Code (IBC) is intended to provide relief to homebuyers and the MSME sector. Moving the Insolvency and Bankruptcy Code (Second Amendment) Bill 2018, Finance Minister Piyush Goyal said, “We want to address concerns expressed by the MSME sector and homebuyers. We have learnt from two years of implementation of IBC, and through the amendments, we want to strengthen IBC Bill.”
Participating in the debate on the measure, Congress member Veerappa Moily said the National Company law Tribunal (NClT) has become “an instrument for siphoning off funds” of the treasury as banks were taking huge haircuts and corporates were buying out insolvent companies for paltry sums.
NK Premachandran (RSP) said the promulgation of the IBC (Amendment) Ordinance was a “clear case of crony capitalism”, saying it intended to benefit a particulate industrial house. The Bill, introduced in the lok Sabha by Goyal last week, replaces the Ordinance which was approved by the Union Cabinet in May. The amendments to the IBC was intended to give relief to the homebuyers by recognising their status as financial creditors, thus giving them due representation in the Committee of Creditors (CoC) and making them an integral part of the decision-making process.
The Bill also proposes to reduce the minimum voting threshold for the CoC to 66 per cent, from 75 per cent for key decisions — a provision which was Opposition said was aimed at benefiting one corporate.
Moving the Bill, Goyal said alleged that the previous Governments had also come out with laws like (The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI Act), Debt Recovery Tribunal (DRT), but loan recovery related matters had remained unresolved for years.
“And earlier during the loan recovery process the value of assets used to get reduced substantially. The amount recovered used to be very less,” Goyal observed. For the time bound auction of assets of loan defaulting companies, and to ensure maximum recovery of bank loans , we have brought IBC,” he added.
As per the amendments, Micro, Small and Medium Enterprises (MSME) sector would get a special dispensation under the code. The amendments also do not disqualify the promoter to bid for his enterprise undergoing insolvency process provided he is not a wilful defaulter.