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ARTICLE · 10 JANUARY 2018

Is There A Need For The FRDI Bill?

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India presently does not have any integrated or comprehensive legal framework for resolution and liquidation of financial firms, however, the Financial Resolution and Deposit Insurance Bill, 2017 ...

IndiaFinance and Banking
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Background:

India presently does not have any integrated or comprehensive legal framework for resolution and liquidation of financial firms, however, the Financial Resolution and Deposit Insurance Bill, 2017 (hereinafter referred to as 'FRDI bill' or 'the bill') tabled in August, 2017, has been introduced to cater to the need for an integrated and comprehensive legal framework.

It seems to be favorable for a depositor in case of a bank failure because the resolution of bank is more favorable towards the depositor than the liquidation of the bank as depositors will get greater value in case of resolution of the bank than in case of the bank undergoing liquidation. FRDI Bill establishes a 'Resolution Corporation' and a 'Comprehensive Resolution Regime'. The bill provides for a 5-stage health classification of financial firms as stated in the press release by the Department of Economic Affairs.1

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