Government's FRDI Bill triggers bank run in Andhra Pradesh and Telangana

Clarification by the Centre regarding the bail-in clause has failed to ease anxiety in the two southern states.

FP Staff March 30, 2018 21:39:06 IST
Government's FRDI Bill triggers bank run in Andhra Pradesh and Telangana

Thanks to a fear of losing their hard earned money, because of a bail-in clause in the Financial Resolution and Deposit Insurance (FRDI) Bill, people in Andhra Pradesh and Telangana are queuing up to withdraw fairly large amounts from their bank accounts, according to a media report.

The salaried, who typically withdraw only Rs 5,000 to Rs 10,000 in the first few weeks of any month, have been queuing up to draw the entire amount from ATMs immediately after their salary gets credited, reported The Times of India.

Governments FRDI Bill triggers bank run in Andhra Pradesh and Telangana

Representational image. Reuters.

The FRDI Bill, which proposes to check the fallout of the failure of a financial institution, includes a bail-in clause that states depositors will have to bear a part of the resolution cost by a corresponding reduction in claims. Clarification by the Centre regarding this bail-in clause has failed to ease anxiety in the two southern states.

Bankers have reportedly asked their customers not to panic. The State Bank of India's (SBI) Chief General Manager for the Hyderabad Circle, Swaminathan J, told clients that, "there is no need to panic. The FRDI Bill is still a Bill and the government has clarified on the bail-in clause and said that depositors will be protected. There is no history of depositors facing a situation where they have lost their deposits in public sector banks. All their deposits are safe and secure."

Any prolonged bank run could impact banking operations in the two states.

Earlier, Telangana Finance Minister Etala Rajender told the Telangana Legislative Council, “The crunch is due to inadequate supply of currency by RBI, reduction in cash inflow from the public, high demand for higher denomination notes. ATMs are going dry and banks are also not giving cash. RBI officials are saying cash going out of banks is not coming back in Telangana and Andhra.”

Updated Date:

also read

India's overall economic activity, driven by consumer confidence and bank credit, remains strong: RBI article
Business

India's overall economic activity, driven by consumer confidence and bank credit, remains strong: RBI article

Amidst upbeat consumer and business confidence and an uptick in bank credit, aggregate demand conditions stay resilient while on the supply front, rabi sowing has exceeded last year’s level and the normal acreage, it noted

RBI proposes new norms for classification, valuation of banks' investment portfolio
India

RBI proposes new norms for classification, valuation of banks' investment portfolio

The new norms propose to bridge the gap between the existing guidelines and global standards and practices with regards to classification, valuation and operations of the investment portfolio of commercial banks

India's banking, financial institutions struggling to deal with increasing fraud: Deloitte survey
India

India's banking, financial institutions struggling to deal with increasing fraud: Deloitte survey

Key reasons identified for the increase in fraud incidents over the last two years include large-scale remote working models, an increase in customers using non-branch banking channels and the limited/ineffective use of forensic analytics tools to identify potential red flags