Cabinet approves the bankruptcy framework for financial sector

The bill provides for a comprehensive resolution framework to deal with bankruptcy situation in banks, insurance companies and financial sector entities.

The Union Cabinet chaired by the Prime Minister Narendra Modi, on Wednesday, approved the proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017. 
 
The bill provides for a comprehensive resolution framework to deal with bankruptcy situation in banks, insurance companies and financial sector entities. 
 
“The Financial Resolution and Deposit Insurance Bill 2017 when enacted, will pave the way for setting up of the Resolution Corporation. It would lead to repeal or amendment of resolution-related provisions in sectoral Acts as listed in Schedules of the Bill. It will also result in the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 to transfer the deposit insurance powers and responsibilities to the Resolution Corporation,” Ministry of Finance said in a note. 
 
The Resolution Corporation would protect the stability and resilience of the financial system and help protect the consumers of covered obligations up to a reasonable limit and also the public funds. 
 
The government has earlier enacted the Insolvency and Bankruptcy Code, 2016 (IBC) for the insolvency resolution of non- financial entities. 
 
The proposed bill complements the IBC by providing a resolution framework for the financial sector. 
 
“Once implemented, this bill together with the Code (IBC) will provide a comprehensive resolution framework for the economy,” it said.
 
The Financial Resolution and Deposit Insurance Bill, 2017 seeks to provide relief to the consumers of financial service providers in financial distress. 
 
Further, it aims to strengthen and streamline the current framework of deposit insurance for the benefit of a large number of retail depositors. 
 
This bill seeks to decrease the time and costs involved in resolving distressed financial entities.
 
Source: PIB

 


Event date: 
Thursday, June 15, 2017

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