*This Tsunami will wipe out your money lying in the Banks*
I
now get on with my "banking Armageddon amendment" that is under way.
Read the post and all the links that I have provided here and you will
understand as to how the "kitchen sink" is thrown at you by this Govt.
1.
Banks, the world over, get into problems, when the loans advanced by
them are not repaid on time, by the borrowers. When the economy is in a
slow-down, many of these borrowers go belly up and become NPAs.
2.
Normal banking prudence suggests that the banks should auction the
assets given by the borrower as security, at the time of taking loans.
Generally banks insist on 150% security of the loan amount. For example,
if a borrower wants Rs.100 as loan, he has to provide security worth
Rs.150 before availing the loan.
3.
However, for big borrowers, every norm is flouted and when they become
NPAs like that of Anil Ambani in Telecom, you are talking of outstanding
dues worth Rs.45,000 Cr. Now the question is, who will replace the
funds, that were loaned to him.
4. Today the NPAs of Indian Banks, amount to over Rs.10 Lac- Cr.
Jaitly or Urjit Patel do not give the actual figures. To resue these
banks, the Govt. has 2 options. They are called "bail-out", which means
the Govt. uses the taxpayers' money to fund the bank. This is very wrong
but it has now been happening, quite regularly in India,
5.
The other monstrous option is called "bail-in". The is the term that
forms the very pivot of this post and has never been resorted to, in our
country earlier. Now what is "bail-in". The dictionary meaning of
"bail-in" is - "rescuing a financial institution on the brink of failure
"by making its creditors and depositors" take a loss on their
holdings". A bail-in is an internal process and is the opposite of a
bail-out, which is external and handled by Govt. with budgetary
allocation.
6. You just
deposit your money in a bank as a "Savings Deposit or Fixed Deposit" to
use it whenever you want. You have no clue as to how well the bank is
managed. Now Modi & Jaitely have got a bill approved by the Cabinet
called "The Financial Resolution and Deposit Insurance (FRDI) Bill,
2017" and this has now been referred to a Joint Parliamentary Committee
before getting it passed in the Parliament.
7.
This bill covers "bankruptcy of businesses such as banks and
insurance". Financial resolution includes solutions for banks facing
‘imminent’ risk to their viability & their very existence, depending
on their capital, asset worth and quantum of NPAs.
8.
Now comes the wily Jaitley into the picture. This Bill also introduces
the provision for a “bail-in”, whose purpose is to provide capital to
absorb the losses of a bank and ensure its survival. Here, survival does
not mean safety of depositors’ money, but restoration of capital of the
bank. The bail-in empowers the bank to cancel a liability owed by the
bank or change the form of an existing liability to another security.
9.
In simple words, it means that your savings account balance of Rs.15
lacs, can be reduced to Rs.1 lac, which is mandatory by law. Or they can
convert your savings account balance of Rs.15 lacs to a Fixed Deposit,
repayable after 5 years, giving you of 5% annual interest.
10.
A question may arise in your mind, if such things happen abroad.
Certainly yes and in a big way. Cyprus was the first country to the face
"bail-in" in 2013. The depositors lost 47.5% of their savings in
phase-1. They also had a phase -2. See the report from Cyprus Mail,
which screams "Lenders set Bank of Cyprus bail-in at 47.5%" View the
link.
http://cyprus-mail.com/2013/07/28/lenders-set-bank-of-cyprus-bail-in-at-475/
12.
When the banks make hefty profit, you don't get anything but when they
are into losses, "suppliers & depositors have to lose their money.
And the heartless duo of Modi & Jaitley have come up with yet
another brutal aspect. Just unbelievable.
13.
To recover the money from the defaulters, there is no attempt so far by
the Reserve Bank of India to blacklist these entities from getting
further loans or prevent their managements from retaining a majority
equity stake, as penalty for the huge haircuts (writing off loans) being
taken by banks. Ambanis & Essars can go away scott free and we
depositors have to clean the toilet.
14.
In a nut-shell they are now trying to shift the responsibility of
rescuing the "sinking banks" from the Govt. to the Suppliers &
Depositors of the Bank. The borrowers can go on a fishing trip. Trust in
Banking Industry would be decimated. People would gradually close all
their bank accounts and keep their cash under the bed. Bloody madness.
Share this extensively thru' every social media. This bill should not be allowed to become an act.
FB link :https://www.facebook.com/b.r.muralidharan/posts/1615181888538789
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