‘Bail-in’ clause formalises risk associated with deposits, say bank pensioners

The ‘bail-in’ clause in the Financial Resolution and Deposit Insurance (FRDI) Bill formalises the risk associated with bank deposits, says the All India Bank Pensioners’ and Retirees’ Confederation.

This would shake the confidence of the common man in the banking system and adversely affect the interests of pensioners and retirees, its representation to a Joint Parliamentary Commission (JPC) said.

The Bill has come as a rude shock for pensioners and retirees who are anguished that their hard-earned money kept in bank deposits may evaporate due to ‘certain decisions’ by the government.

The real cause of worry lies in the bail-in clause with respect to failing financial institutions. It provides for the use of depositors’ funds to shore up the finances of a failing institution.

“For us, this is a question of life and death. The balance lying in the SB account should continue to be payable on demand,” the representation said.

Similarly, term deposits should be made payable as per the terms and conditions of the account and under no circumstances should a portion of it or in full be converted into shares or debentures.

The bail-in clause also includes a provision to cancel the liability owed by a specified service-provider and also modify or change the form thereof.

Deposits are a form of liability on which a bank has to pay interest. This change of form of liability might affect the safety and security of funds kept as bank deposits.

The confederation reminded the JPC that serving employees or retired personnel are in no way responsible for the huge burden of NPAs and resultant provision to take care of such NPAs.

A perusal of the list of topmost defaulters of loan of any bank would reveal who exactly these persons are. This burden can never be shifted onto the shoulders of present and former employees.

And in banks, pension fixed on the date of retirement remains frozen and the same is not revised with the signing of the bipartite settlement, which normally revises wages/salary of serving people.

As pension is not revised upwards, the retirees have to depend on the interest income on deposits kept mostly in those banks from where they have retired, the body said.

The rate of interest on term deposits is dwindling by the day and the real income of a pensioner is reduced by every downward revision of interest. When a pensioner expires, he leaves an insignificant amount for his spouse or his successors.

“We thoroughly oppose the FRDI Bill in general and the bail-in clause in particular. We call upon all members of the JPC to see that the Bill is not passed in Parliament,” the representation said.

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