New Delhi: Finance Minister Arun Jaitley on Thursday assured the Lok Sabha that money of all depositors in public sector banks will be protected and there is no need to create any fear psychosis.
"The government is committed to protecting every depositor in public sector banks and therefore we need not create any fear psychosis," he said while replying to a discussion on 'Supplementary Demand for Grants - Second Batch for 2017-18'.
"When the (FRDI) Bill comes before the joint committee please discuss this. There is 2011 G-20 commitment when UPA was in power and that was offtake of 2008 global crisis when the Lehman Brothers collapsed," he said.
The Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, introduced in the Lok Sabha in August this year, has a 'bail-in' clause, which some experts say brings potential harm to deposits in the form of savings accounts. The bill is currently undergoing scrutiny by a joint parliamentary committee.
"What do we do with that clause (bail-in). The committee has wise people which will make some recommendations. We will consider that. We are open minded. We are very clear and the level of protection the government would want would be much higher than level which existed till today," he said.
The FRDI Bill proposes to create a framework for overseeing financial institutions such as banks, insurance companies, non-banking financial services (NBFC) companies and stock exchanges in case of insolvency.
The 'Resolution Corporation', proposed in the draft bill, would look after the process and prevent the banks from going bankrupt. It would do this by "writing down of the liabilities", a phrase some have interpreted as a "bail in". The draft bill empowers the Resolution Corporation to cancel the liability of a failing bank or convert the nature of the liability.
It does not specify deposit insurance amount. At present, all deposits up to Rs 1 lakh are protected under the Deposit Insurance and Credit Guarantee Corporation Act that is sought to be repealed by this bill.
Jaitley added that the Indian economy growing at 7-8 percent is the new normal and inflation is under control. Earlier this week, the government sought Parliament's approval for additional expenditure of Rs 66,113 crore, which includes funds to roll out schemes for providing electricity connections to the poor and payment of urea subsidies.
Of this, the proposals involving net cash outgo aggregates to Rs 33,379.99 crore and gross additional expenditure, matched by savings of the ministries/departments or by enhanced receipts/recoveries aggregates to Rs 32,732.05 crore.
The Lok Sabha on Thursday approved Supplementary Demand for Grants entailing additional expenditure to be done by various ministries and department.
Jaitley also said the government has maintained glide path on fiscal deficit so far.
"The idea is that glide path of the fiscal deficit should always be maintained so that our borrowing keeps coming down," he said.
The government has pegged the fiscal deficit target of 3.2 percent of the GDP for the current fiscal.
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