 Hello and welcome to NewsClick. As you all know, the FRDI bill has been making quite a splash lately. The cabinet has passed it a few months ago and the government is all set to pass the bill in the coming parliament session. There have been a lot of voices criticizing the bill saying that it is going to wipe out the public sector. It is government's aim to privatize all of the banking sector. And also the fact that there are certain provisions in the bill that are going to negatively affect the depositors. So we have here with us to discuss this issue, Mr. Venkata Chalam of AIBEA. Hello sir, welcome to NewsClick. Why is the government in such a hurry to pass it? And because so far in India, there has rarely been a banking crisis in which banks had to be wound down where depositors have been affected. And so far RBI was able to handle any banking sector problems so far quite well. So why is the government trying to introduce this bill? This is a long story. See, in 2008 there was a crisis in America, Lehman Brothers, the city bank, all they were in trouble. And to bail those private banks, the government had to spend, the American government spent the taxpayers' money. So there is a lot of hue and cry that why we should spend our money? Why government should use my money to bail out the private people? When they are making profit, we don't get anything, they are enjoying. So when they are involved, they must save themselves. We should not use our money. The government should not allow. Like that problem came. And so that was discussed in the G20 meetings. In 2009, they set up one financial stability board. IMF was part of that. India is also part of G20. At that time they were talking that we must have some rules so that there is stability of the financial system. There should not be a crisis. And one of the conditions or one of the points was that there must be internal safeguards and for taking care of any eventualities. Suppose there is some possibility of bailout. It should not be bailout. It must be bailing. Within these resources, you have to use that money to bail in. Government should not. So that became a guideline and that came to India also. So that was a need being part of G20. We must also have some rules. In that background, this FRDI bill, it was given to one Tiage committee and they proposed something. Then it has become a bill and now it has gone to the joint parliamentary committee. But the point is definitely, broadly, we can agree that suppose a bank is liquidated, then what are the safeguards? See, one safeguard was in our country. We introduced the deposit insurance corporation. Suppose the bank will pay, then banks will pay insurance from that money. It started from 1500, you can imagine in India. 1500 was the initial coverage by the deposit insurance. Today it is one lakh. But even today it is nothing. Banks are dealing huge money. As of today, about 2225 banks, they are part of this deposit insurance corporation. They are paying some premium half-yearly, huge money, about 5,000-6,000 crores. In turn, the deposit insurance corporation, they guarantee if any bank is liquidated per account holder, I will reimburse one lakh. Today, for the 103 lakh crores insured with this corporation, if you say this one lakh ceiling will apply, then it is hardly about 30% only will be given back. That means even today there is no real coverage. See, from 1930 to almost 1960, there was a huge failure of banks, all those private banks, almost 1600 banks collapsed, 400 banks, only in Kerala. So all these created problems and banks collapsed at that time. People lost their money. All India Bank employees also worked as a general secretary at that time, Mr. Prabhakar. He was a member of the parliament. Titi Krishnamachari was the finance minister. So it became a big issue in the parliament. It raised many people including the Communist Party. All of them supported. Yes, this is not proper. People cannot lose their money because of the mismanagement by the private owners of the bank. So a specific amendment was made to the banking regulation and the government also assured that in future, that even if the Reserve Bank says that some bank is not doing well in public interest, that can be put on motorium. We can close that bank, but that must be mandatorily merged with another bank. That is, from 1960 you will find there have been a lot of private banks that have collapsed. Bank of Tamil Nadu, Bank of Tanjahu, Bank of Kochi, Bank of Karat, Global Trust Bank in Uttar Pradesh, this Indusan Commercial Bank, Banaras State Bank, Bank of Bihar, Urbanshal Bank. Like there are so many banks have collapsed, but none of these people's money was affected because immediately that was hand over to another bank. So that's why today people feel comfortable. More and more people are keeping the money in the bank because that is safety, because that provision is there. Now in some other global contracts in government is bringing this financial bill, financial resolution bill. And number one, that is diluting the Reserve Bank existing role. Reserve Bank is a central bank. It is a time trusted institution. It must be strengthened. Now they are trying to weaken Reserve Bank of India by giving autonomy or power to this new corporation. Who will run that bank? This is all government nominee. That means there will be an appendage of the government. But main point is the context. Is it the time in India to talk about financial liquidation and possible protection? India already our common people, middle class people who are saving the money in the bank, they are worried. Because 15 lakh crore is the bad loan and that money is stuck up. Now slowly they are writing off, things are coming out. And now they are also going to insolvency courts and NRC, LT, etc. and huge hackers. That means people are worried. My deposit is being used to give loan and that money is not coming. Whether my money is safe. At that time government must come out and say, don't worry, we are there. We will recover the money. Nothing to worry about your money. It is safe. We will take care. On one side banks are not doing well. On the other side government is talking. And additionally in that bill they are also talking of the bail-in clause. In addition to the insurance, the government says that within the bank the resources can be utilized for the liquidation process. That means people are worried that my money will be utilized. I am keeping the money for my own old age for my normal income per month, etc. To be clear, you did say that according to the existing rules the RBI is supposed to step in every time a bank is in crisis and supposed to merge it and safeguard the depositors till now. So you are saying that the new FRDI bill and the bail-in clause is actually going to do the opposite. It is going to risk the deposits. That apprehension will come. In India even with this FRDI bill the government cannot close any bank. It is not possible because already banking regulation provides it has to be met with somebody. So whether it is going to supersede that or it is a superfluous clause, that clarity government has to tell. Now FME is making a personal assurance. It must be made on the floor of the parliament that nothing to worry. Your money is safe in the bank. Why they are keeping the country in dark? Why this government is doing all the dubious things? Just because it happened in America, America is all totally investor oriented banking. So when they get profit they enjoy. When they are in trouble they have to office it. Whereas in India it is deposit oriented banking. Common people, 106 lakh crores of people's money. It is ordinary people's money, common people's money. See that's why in our country people keep their money in the banks. They are not return oriented. Otherwise they would have speculated this money in so many other avenues which is not happening. They want safety, not higher return. They don't believe in speculation. So the government must appreciate and understand this and come out with a scheme where people's money is guaranteed, assured. There is no risk of any closure and this bill is definitely creating a panic. Why government is talking about liquidation? Well the intention is not to liquidate. So it is a contradiction that you say that your money is safe but you are introducing a bill approved by the cabinet. For liquidation process. So that is why immediately we feel from AIBA that the FRDA bill must be totally deferred. And to the extent it is required it must be completely changed without affecting the autonomy of Reserve Bank, without diluting any of the regulation and also guaranteeing the safety of the people's money. Then we can think of something. If some cheat fund, some mutual fund, some all types of private small banks and banking payment banks are coming out. Maybe their risk is small. So they may be covered. But definitely this public center banks are first to be kept out. It will not apply to public center bank. Like that they must talk. So I hope the joint parliamentary committee is also there attending to that. Something must come. Government should not hurry up at all. It is a very serious matter. Just now you mentioned the public sector banks. So there is another accusation against the government that the real intention of the FRDA bill is to shrink the public sector and through mergers and some closures of the smaller banks. What is your opinion? That agenda is also there. The government says it is not my business to be doing banking business. So I want to hand over because the corporates are accepting pressure that why should I go to a bank and I have to stand before them for money. Please give this bank to me because I will directly mobilize the money of the people. I will use it for my purpose. Why should I stand before a bank? They are putting all conditions. So that pressure is there. This government is succumbing to that. That is one thing. But FRDA is definitely in the background of the American banking crisis, European banking crisis arising out of that. That is coming. It all will coincide. See bad loan. Then this FRDA bill, privatization, consolidation, merger, weakening, parity sector loan. These are all part of the total thing that instead of people's money to be utilized for people's welfare, people's money is being squandered for private corporate looting. So this is in fact the ideological struggle. The government is trying to do something. We are trying to oppose. It is no longer an issue between the government and the banking trade unions. Now people must be aware that their interest is also involved. It must become a people's movement. The real urgent reform required in the banking system today is to take stringent measures to recover the money. Now 15 lakh crore, that means banks are losing around one and a half lakhs of revenue. Interest revenue, loss of one and a half lakh, around 10% on the bank. We are not getting interest on that. So that is a thing and make them performing. If they don't perform, then they must take action to recover the money. Particularly corporate people. Almost 60-70% of the bad loans are due to attributable to corporate people. One Malaya. Malaya is a small account because only 9000. Now Reliance Corporation, Reliance Communication, 45,000 crores. Now Videocon, another 47,000 crores. Or Bush and Stain, 90,000 crores. Huge money. So the government cannot say, I am going for this NCLT, I am going for insolvency. We don't want that insolvency. We want the money back. So how to get the money? If they take action, then people will believe in the government that they are safeguarding my money. Instead of that, at the wrong time you are talking about liquidation. That is why the whole panic among the people. The timing is very bad. It happened in 2008. Why do you come today? On one hand when you talk of surrendering to the default test, on the other hand you are talking about liquidation. Naturally one plus one is two. People are worried. And another implication which I want to draw the attention of the people is today, India is even today a developing country, a developing economy. And today the bank deposit GDP ratio is only around 47-48%. If the government says no sub-cov, because sub-case are everybody, all prosperity, progress, development means the economy must be active. For that banks have a role. So bank must give more money for agriculture, for employment generation, poverty reduction, rural development, infrastructure, health, education. Banks have to pump in more money. So if banks have to give more loan, bank must have deposit. So unless banks have deposit, I can't give loan. But now you are threatening the people and creating panic that your money is not safe. That means people will not keep the money. If there is no money in the bank, then I cannot give loan. If I don't give loan, then I cannot propel or intensify the so-called prosperity, progress and because etc. So it's a chain. Government must completely review and this bill is not warranted at all now. They must now immediately come to parliament and say that this was brought for a different purpose. Now it is creating problem. So we defer it. Now later we will see this bill is not required now. That's what is required. Sir, one final question. As we were talking about the NPAs and as you said the NCLT or the insolvency proceedings haven't actually helped in recovering the NPAs. So what are the concrete steps you think that government should take to recover these NPAs? The point is that it is possible. First of all, every loan is not a deliberate default. We must first bifurcate what is a deliberate default and what is a normal legitimate or maybe genuine default. So for genuine default some soft option. We can give time, we can respect etc. But once you identify, it's a deliberate default. Number one, it must be termed as a criminal offence. Deliberate, bank loan, default must be defined as a criminal offence under the criminal procedure in our country. Criminal action. Take criminal action. Now in civil case you are filing case only against the company. You are filing case against Kingfisher. You are filing case against Reliant. You are filing case against Videocon. You are filing case against Bush and Steele. So the promoter, the owner, the directors, they are not bothered. Civil case goes on. But if I file a criminal case against them, then they'll be afraid. People will be thinking twice before cheating the bank in the name of bad loan. So money recovery is very important. Second, where the sector is having problem. Government must work out a package. Maybe coal, maybe steel, maybe power, maybe infrastructure. You can't blame the bank. Banks are not responsible. When you want the country to develop, you are asking the bank to give loan. Then these are all long-term loans. So there can be so many possibilities. There can be a long-term finance corporation. These loans can be transferred that you can follow. So that you relieve the bank. Bank must now cater to the needs of these very, very common people to revere the economy. The economy itself is in difficulty. Agriculture is in crisis. More money must be given. Government is telling FM says, in five years I want to double the farmers' income. How is it possible unless you invest, unless banks give loan for agriculture? It's not happening. So that's why the economy banks are interlinked, interrelated. And unless the banks are taken care, economy will not grow. And if economy does not grow, poverty will increase and India will be further down in the Human Development Index or whatever it may be. That's why, I mean, coming back to the FRBI bill, this is not required. What is required? Recovery of the bank loan. That is the topmost priority. Arun Jaitley must concentrate on that.