The Full Form FRDI is Financial Resolution and Deposit Insurance.

The Parliament is considering the Financial Resolution and Deposit Insurance Bill (FRDI), 2017 to give a guideline for resolving crisis in financial institutions and as well as to protect the depositor’s interest. Objective of the Bill is to create a comprehensive resolution framework for specified financial institutions in the country. The Bill if passed will create an insolvency regime for financial sector entities.

Resolution regime is a government created legal framework that resolves a failed bank/financial institution in an orderly way, so the financial markets do not collapse. Simply, it is an insolvency regime for financial institutions.

“Resolution” indicates an orderly resolution of distressed financial firms without taxpayer’s support. The resolution regime provides mechanisms and guidelines for an orderly management of the distressed bank’s affairs either by reconstructing it or by liquidating it- but without using public money.

A proper understanding of the relevance of the Bill need knowing the background in which the Bill was created.