Political and Economic Notes :
FRDI Bill Organised Loot of Middle Class Depositor
The Central government introduced in August 2017 , the Financial Resolution and Deposit Insurance Bill , 2017 ( FRDI Bill ) in the Lok Sabha which was later sent to a Joint Parliamentary Committee for study and report back before the end of next budget session .
The aim of the Bill is to regulate the exit of financial firms and insulate the larger financial system from being effected by their failure . These financial firms , called service providers in the Bill , include commercial , regional and cooperative banks , insurance companies , payment system operators , Non-Banking financial companies ( NBFC ), pension fund operators , mutual funds and securities firms .
The bill proposes to establish an all-powerful financial resolution authority – a “ Resolution Corporation ” ( RC ). The RC will have powers to acquire and transfer the assets of , even liquidate , any financial service provider in case of its probable failure .
At present , the Indian financial sector is being regulated by various institutions like Reserve Bank of India ( RBI ) for the banks and NBFCs , Insurance Regulatory and Development Authority ( IRDA ) for insurance sector , Securities and Exchange Board of India ( SEBI ) for securities and mutual funds and Pension Funds Regulatory and Development 12
Authority ( PFRDA ) for pension fund managing companies . All these bodies were formed under the Acts passed by the Parliament . Banks and insurance firms belonged to public sector are governed by separate laws . The FRDI Bill intends to amend about 20 of these laws to bring the resolution process of any probable failure under the RC . The Background
After the financial crisis in 2008 and trillions of dollar bail-outs for the banking sector , the imperialist powers wanted a regulatory mechanism . So G-20 formed Financial Stability Board ( FSB ) which adopted “ Key Attributes of Effective Resolution Regimes for Financial Institutions ” in October 2011 . This was endorsed by the Heads of G-20 ’ s Cannes summit in November 2011 as the “ New International Standards for Resolution Regimes ”.
The FSB ’ s recommendations are based on the premise that the global financial crisis of 2008 was the result of failure of “ too-big-tofail ” banks and not because of speculative activities indulged by these banks . Thus it tries to conceal the truth that 2008 crisis was inherent in the capitalist system which drives by its thirst for ever increasing profits . Hence , these G-20 ’ s ‘ international standards ’ are market based solutions and will not go to resolve the problem created by the very same market forces as the later experience proved . It is clear that this solution is suited to the imperialist economies and not equally suitable to other countries of Asia , Africa and Latin America which have varied economic structures .
This became pronouncedly clear in its implementation . Countries like US , UK , France , Germany , Italy , Netherlands , Spain , Switzerland and Hong Kong had fully implemented the resolution tools recommended by FSB , while Japan implemented all but bail-in clause . Regarding the insurance companies , none of the seven recommendation of FSB was implemented except by Japan , Hong Kong and USA . On the other hand , Argentina , Austria , Brazil , China , Indonesia , South Korea , Mexico , Saudi Arabia ,, Singapore , South Africa and Turkey have implemented FSB ’ s reforms partially – none of them implemented bail-in provision and even some have not provided for the bridge institutions . Only nine out of the 24 member-states of FSB have opted for establishing a single resolution authority while the other states have opted for some form of co-ordination arrangements among the existing regulatory bodies . This clearly shows that there is no need to fully implement the financial resolution methods and tools meant for imperialist economies in India .
Class Struggle