In a statement issued late on Monday, the AIBEA said: "The Bill has created widespread fear, apprehension and panic amongst the depositors that the government is contemplating to liquidate the banks and the deposits of the Banks will not be returned because of the bail-in clause of the Bill."
According to AIBEA, the Bill provides for setting up a new authority Financial Resolution Corporation (FRC) which will deal with liquidation and resolution of Banks Insurance and other financial institutions.
"This FRC will supersede the powers of RBI (Reserve Bank of India) and other agencies dealing with the problem at present. Deposit Insurance Corporation guarantees deposits upto Rs. 1 lakh per customer. This will be closed down and the FRC will decide the amount now," AIBEA said.
In addition, the FRC has power to liquidate any bank and permit to use the depositors' money to bail-in a bank. This provision is creating doubt and panic in the minds of everyone, the statement said.
The bank union spoke of stringent measures to recover the huge bad loans from big corporates and other defaulters.
The AIBEA said the question of bail-in does not arise in Indian situation as banks under liquidation are general merged with stronger banks.
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