How to handle bank failure: It’s a question of trust

Financial Resolution and Deposit Insurance Bill tries to bring global standards to resolution of financial firms. But there is a strong case for keeping deposits out of the bill’s purview.

Written by Usha Thorat | Updated: December 21, 2017 7:29 am

Depositors go by the convenience of location and use of the savings bank or current account for a variety of transactions. (Illustration: C R Sasikumar)

Question: It is fair to say that no depositor in any commercial bank in India has lost money since the failure of the Palai Central Bank in 1960, although some banks have failed. The Reserve Bank of India has used its powers under the Banking Regulation Act and the Deposit Insurance Scheme to ensure that the interests of depositors in commercial banks are protected. Then, why have the Financial Resolution and Deposit Insurance (FRDI) Bill?