The All India Reserve Bank Employees Association has demanded that safety and security of depositor money must be ensured after passage of the proposed Financial Resolution and Deposit Insurance Bill.

The forthcoming winter session of Parliament is expected to take up the Bill that aims to set up an agency Financial Reconstruction Corporation .

It will be empowered to order the amalgamation, merger, liquidation, and acquisition of any bank, insurance companies, and non-banking financial companies if it feels the institution carries an ‘imminent’ or ‘critical’ risk to viability.

The corporation can declare any of the entities under its control as bankrupt, said Samir Ghosh, General Secretary of the Association. He feared that measures to stave off the risk may include confiscating part of depositor money.

As of now, a bank depositor is insured to the extent of ₹1 lakh in case of a bank failure. The Deposit Insurance and Credit Guarantee Corporation under the RBI has been processing the same since 1960.

As per the provisions in the new Bill, this job will be shifted to the Financial Reconstruction Corporation which may decide on the compensation in case of any bank failure.

More importantly, as per Section 52 of the proposed Bill, depositors will lose their rightful claim to retrieve their savings in case of liquidation of banks and insurance companies.

Such usurpation of depositor money happened in many European countries post the 2008 melt-down. So long as common depositors in India kept their hard-earned money mainly in public sector banks, they were assured of safety, Ghosh said.

“But this would no longer be the case. The Government is as well shedding its equity in public sector banks which are saddled with huge NPAs.” Bank depositors cannot be faulted for being apprehensive on this count.

According to Ghosh, besides assuring them safety and security, there is a need to enhance insurance cover on deposits which should ideally continue to be managed by the RBI. Efficacy of any new entity here would be doubtful, he added.