Reserve Bank employees bat for depositors; ask Urjit Patel to raise insurance 10-fold to Rs 10 lakh

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The All India Reserve Bank Employee Association has written to RBI governor Urjjit Patel demanding security against the proposed Financial Resolution and Deposit Insurance Bill.

The All India Reserve Bank Employee Association has written to RBI governor Urjjit Patel demanding security against the proposed Financial Resolution and Deposit Insurance Bill by increasing the maximum coverage of insured bank deposits from Rs 1 lakh to Rs 10 lakh, TV reports said. The association has also asked the central bank to increase representation of RBI members in Financial Resolution Committee.

The association has asked that depositors’ money must be ensured after the passage of the proposed Financial Resolution and Deposit Insurance Bill.  The Financial Resolution and Deposit Insurance Bill, 2017, seeks to create a framework for resolving bankruptcy in financial firms (such as banks and insurance companies), as there is no specific law at present in India for resolution of failures of financial services providers.

The legislation was introduced in the monsoon session but was later referred to the joint committee of both the houses of Parliament, the Lok Sabha and the Rajya Sabha.

The bill proposes to establish a ‘Resolution Corporation’ which will classify service providers such as banks and insurance companies based on their risk of failure. The corporation may also investigate their activities. The bank unions were opposing the bill for this proposal and had said the objective is to heavily empower the new authority with sweeping powers to dismantle and erase public sector financial institutions.

Meanwhile, the RBI is going to announce its fifth Bi-monthly monetary policy today. with economists saying that the central bank is going swing between neutral and hawkish stance given inflation concerns and most likely put the rate cut on hold.  The central bank had reduced the benchmark lending rate by 0.25 percentage points to 6% in August, bringing it to a 6-year low, however, kept it unchanged in October.

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