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ECONOMIC AFFAIRS

REPORT BANKING

WEF ranks India 30th on global FRDI Bill: Joint
manufacturing index panel gets more

The World Economic Forum, 13 Thailand and Turkey, among others. time to submit
January 2018, ranked India at 30th China figures among ‘leading
position on a global manufacturing countries’, while Brazil and South Africa report
index - below China’s 5th place but are in ‘nascent’ ones.
The Joint Committee of Parliament
above other BRICS peers, Brazil, The 25 ‘leading’ countries are in the
Russia and South Africa. best position to gain as production looking into the Financial Resolution
and Deposit Insurance (FRDI) Bill
Japan has been found to have the systems stand on the brink of
best structure of production in the exponential change, the WEF said in the 2017, on 18 December 2017, has been
Geneva-based WEF’s first ‘Readiness report. granted extension of time for
for the future of production report’ In terms of scale of production, India presentation of the report to the last
and is followed by South Korea, has been ranked 9th, while for date of the Budget session. With the
Germany, Switzerland, China, Czech complexity it is at 48th place. For market FRDI Bill indicating that depositors’
Republic, the US, Sweden, Austria and size, India is ranked 3rd, while areas monies could be used for “bail-in”
Ireland in the top 10. Among BRICS where the country is ranked poorly (90th of failing banks, the Bill has created
nations, Russia is ranked 35th, Brazil or even lower) include female widespread fear, apprehension and
41st and South Africa at 45th place. participation in labour force, trade panic amongst depositors. The
The report, which analyses tariffs, regulatory efficiency and apprehension is that deposits in
development of modern industrial sustainable resources. banks would not be returned
strategies and urges collaborative Overall, India is ranked better than because of the “bail-in” clause in the
action, has categorised 100 countries its neighbours Sri Lanka (66th), Pakistan Bill.
into four groups - Leading (strong (74th) and Bangladesh (80th). Other The bill proposes to create a
current base, high level of readiness countries ranked below India include framework for overseeing financial
for future); High Potential (limited Turkey, Canada, Indonesia, New institutions such as banks, insurance
current base, high potential for Zealand, Australia, Hong Kong, companies, non-banking financial
future); Legacy (strong current base, Mauritius and the UAE. The countries services (NBFC) companies and
at risk for future); or Nascent (limited ranked better than India include
stock exchanges in case of
current base, low level of readiness Singapore, Thailand, the UK, Italy, insolvency. The so-called “bail-in”
for future). India has been placed in France, Malaysia, Mexico, Romania,
clause in the draft legislation has
the ‘Legacy’ group along with Israel, the Netherlands, Denmark, the
been commented upon by experts
Hungary, Mexico, Philippines, Russia, Philippines and Spain.
as of bringing potential harm to
deposits, in the form of savings
EXTERNAL accounts.
Crisil launches index to track FPI The ‘Resolution Corporation’,
proposed in the bill, would look after
investments in fixed markets the process and prevent the banks
from going bankrupt. It would do this
Rating agency Crisil, on 1 January for FPIs and its investment trends in
2018, launched an index to measure domestic fixed-income securities, has by “writing down of the liabilities”,
a phrase some have interpreted as a
the performance of investments of generated annualised returns of 9.15 per
“bail in”.
foreign portfolio investors (FPI) in the cent over the past five years. Utilisation
fixed-income market. The Crisil FPI of limit for investment by FPIs stands at It also empowers Resolution
Corporation to cancel the liability of
index would serve as benchmark for 95 per cent in corporate bonds and 84
performance of FPI investments in per cent in gilts today, Crisil said. a failing bank or convert the nature
government securities, and ‘AAA’ as Apart from the FPI index, Crisil of the liability. At present, all
well as ‘AA’ rated corporate bonds maintains 47 indices across the bond, deposits up to Rs 1 lakh are protected
with residual maturity greater than gilt, money market, hybrid and under the Deposit Insurance and
three years. commodity segments, which are used Credit Guarantee Corporation Act
The index, which constructed by asset managers for benchmarking that is sought to be repealed by the
based on the regulatory restrictions their products and portfolios. bill.

68 Competition Wizard March 2018