After the bail-in clause in the proposed FRDI bill has raised concerns among depositors, government is weighing the refund option to rescue bank depositors. Amid the insolvency procedure or resolution of financially distressed entities, the new proposed framework will encompass returning back depositor's money with failing bank such that they do not lose on their deposits.

Know in detail about the FRDI bill and bail-in clause here.

In doing so, if the entity fails to compensate depositor fully in cash, remaining balance shall be meted out by issuing bonds. So for safeguarding investors and stakeholders interest in these troubled entities, issuance of bonds for any shortfall is also being weighed upon by the government.

The concerns have sprung up after the deposits are deemed to be used for bail in procedure of the banks while the case actually is not so. Also, even after constant intervention by ministry officials and continuous assurance with respect to their deposits safety, public is largely scared and today a leading dailies reported HNI banking customers calling money managers in plenty for any kind of risks to their deposits with banks.

FRDI bill had been deferred till the last date of the budgetary session to begin on February 1, 2018. The proposed bill is currently under study by the Joint Committee of Parliament for its report to be submitted in due time.

Refund Mechanism to be a better option

The current provision only grants depositors a deposit insurance only to the extent of Rs. 1 lakhs and for deposits over Rs. 1 lakh, customers at their own risk have to keep deposits with the bank so the process of refund as possible either fully in cash or partly by way of bond issuance will provide an extra layer of security to depositor's money.

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