India's ATM’s are running out of

cash . . . Again!

Is cash making a comeback instead

of digital payments push after

demonetization

Depositors fear their money may

end up being used for failing bank

bail-ins . . .

NRIs as well as domestic bank account holders in India may have concerns about the safety of their money in India due the proposed Financial Resolution and Deposit Insurance Bill. What is the Financial Resolution and Deposit Insurance Bill 2017 for?  The purpose of this bill is to set out the procedure for monitoring financial entities in an effort to anticipate risk of failures and take appropriate corrective measures so as to prevent such failures where possible.  In the event of a failure, to set up a procedure of winding down or the revival of financial institutions in trouble by setting out a resolution corporation to replace the existing Deposit Insurance and Credit Guarantee Corporation. What is Deposit Insurance and Credit Guarantee Corporation (DICGC) Bank accounts in India are insured by the DICGC. Generally all commercial banks as well as branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC. Currently, The Deposit Insurance and Credit Guarantee Corporation provides deposit insurance of up to Rupees 1 lakh for each bank depositor. In case where an account has more than one lakh in a failed institution, the excess amount over Rupees 1 lakh is forfeited as the insurance only covers a maximum of Rupees 1 lakh per account. The New FRDI Bill however has not yet specified the insured amount. The ‘Bail-In’ clause for failing financial institutions in the proposed Financial Resolution and Deposit Insurance (FRDI) Bill has become a matter of concern for some people as they worry about losing their money held in Indian bank accounts. The All India Bank Employees Association (AIBEA) voicing their concerns on the proposed FRDI Bill has also demanded changes to the 'bail-in' clause to protect depositors. Despite assurances by the Indian Finance Minister Mr. Jaitley stating that the government will fully protect public deposits in financial institutions, there are some people who remain worried about their money in Indian banks. Misinformation and rumor mongering has fueled the level of concern of some bank account holders. News reports of some industrialists in India cheating banks of thousands of cores of money and escaping abroad have probably added to the concern of Indian bank depositors. Some depositors fear that due to the bail- in clause of the FRDI Bill, their money may end up being used for bank bail-in in case their financial institution gets into financial trouble. India’s ATM’s Are Running Out of Cash. Again! Remember when no cash was available across India at ATM’s following demonetization announcement in November 2016. Now again in April 2018, there are reports of no cash at ATM’s in the Indian news media. The FRDI bill has recently been mentioned as a factor in people withdrawing money from their bank accounts. Increased withdrawals and decreased deposits has led to a shortage of money available in ATM’s in various cities across India.

Current Status of FRDI Bill

The government is waiting for the recommendations of the Joint Committee of Parliament on the FRDI Bill. The Joint Committee has been given a second extension of time to submit a report. Now they have until the last day of the monsoon session 2018 to submit their report. The monsoon season ends generally in August. With rumors of early elections in India, there is always a possibility that we may not see a conclusion soon on this controversial bill. Should NRIs continue to keep money in Indian Banks? Whether NRIs should continue to invest in India is a matter that has to be decided by NRIs themselves taking into account their own personal circumstances and reasons for investing in a country where they do not reside. Those who want to know more about the FRDI Bill can read the proposed bill details, I have posted a copy HERE