Letters: Fears from bailout

With reference to “FRDI bill: Irrelevant and unfair” (December 11), the buzz around the Financial Resolution and Deposit Insurance Bill is making ordinary people anxious because they fear their hard-earned money will be compromised if the government would like to bail out any public sector bank with their deposits. This is primarily because they assume that their deposit is safe and has a sovereign guarantee. I do not think people, in general, know about the present cap of Rs 1 lakh. Things have changed drastically in the last two decades, hence the least this government can do is to increase the limit and provide complete transparency to depositors.

I am sure the government will not like depositors to lose faith in public sector banks because if they start deserting these banks then it will have both political and economic consequences. Rather these banks need to completely overhaul their credit assessment mechanism so that only viable projects are funded and the government maintains a distance from public sector banks. 

Last but not the least, a strong bond market will only ease pressure on these banks as lending to long-term projects is a risky proposition and creates an asset-liability mismatch. These banks are more suited to retail or small and medium enterprise lending.

Bal Govind Noida
 

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