Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a positive note with stocks in the healthcare sector and telecom sector witnessing maximum buying interest.

The BSE Sensex is trading up 61 points (up 0.2%) and the NSE Nifty is trading up 5 points (up 0.1%). The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading up by 0.5%. The rupee is trading at 64.14 to the US dollar.

In the news from the banking sector, market participants are tracking the Financial Resolution and Deposit Insurance (FRDI) Bill under Parliament's consideration. As per the news, the social media is worried about the bill in that it will put bank deposits at risk and that depositors' money would be used to recapitalize banks.

The one concerning clause in the bill causing concern is the provision for a ‘bail in'. In essence, the bill empowers a distressed financial institution to utilise its own public deposits to set its house in order.

Presently, only Rs 0.1 million worth of bank fixed deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). What the FDRI Bill proposes is, to utilise deposits above the insurable limit of Rs 0.1 million by converting the funds into shares of the bank. In other words, the FRDI Bill is simply an extension of the DICGC Act and is not draconian as it is made out to be.

The bill overlooks the truth that the insurance cover for public deposits in India woefully low. The share of insured deposits has fallen drastically from 75% to less than one third in the last two decades, as can be seen in the chart below:

Fixed Deposits Losing their Safety Tag?

In the news from the IPO space, Baring Private Equity Asia-promoted CMS Info Systems – India's largest cash management company – is likely to hit the IPO market in January to raise about Rs 13 billion. As per the news, Baring will dilute about 30% of its stake in the IPO.