Isn't it better to worry before it is too late?

The government is about to pass a Financial Resolution and Deposit Insurance, or FRDI, Bill which seeks to define liabilities of failing financial institutions, such as banks. The bill has a provision for 'bail in', which means that a failing bank can use depositors money to write off bad loans, creating enormous alarm among depositors, who fear that in the event of the collapse of a bank they will lose their money. Unions of bank employees have threatened to go on strike against the bill. This is especially frightening at this time because Indian banks, mainly public sector ones, are struggling under huge bad loans, which could amount to Rs 20 trillion, according to former RBI governor, KC Chakrabarty. Even HDFC Bank, which is the most richly valued lender in the world, may have large non-performing assets on its books, wrote A Mukherjee. The slow growth in the economy means that banks are unable to increase their lending which means their income from interest is weak. Bad loans in banks have been likened to the Titanic by T Bandopadhyay. The government is to spend Rs 2.11 trillion to recapitalize banks, without adding it to the fiscal deficit. During demonetization people deposited Rs 15.28 trillion into banks, which was 98.96% of high value notes in circulation. The government will sell bonds to banks and then lend that money to the same banks to write off their bad loans. This, it is hoped, will allow the banks to start lending for new projects, kick-starting the economy. Having once lost trust in the government due to demonetization, people probably think that the government intends to use depositors money to pay off those bad loans. The FRDI bill will fully protect all depositors assured the Finance Minister. Under old rules depositors are insured for only Rs 100,000, regardless of the total amount invested in a bank and people lost major parts of their deposits when cooperative banks failed in the past but not when private banks, such as Global Trust Bank and Nedungadi Bank, failed, as they were taken over by public sector banks and deposits were covered 100%. "No, you do not need to worry that your deposits will be lost in a bail-in," wrote M Halan. "Your deposits will be insured, just as they are today and there is an additional protection for depositors because the bail-in can be invoked, and your deposits be lost, only if you have given your consent for this to the banks when you signed the deposit forms." "The government must bail out of the bail-in," disagrees A Nageswaran. The government owns public sector banks and is paid dividends from profits. Depositors get fixed interest and lose money because high inflation is tolerated in India. To ask depositors to share in the risks when they do not share in profits is highly unfair. Depends on whether you trust, or not.