The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017. The Bill would provide for a comprehensive resolution framework for specified financial sector entities 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.
The Government has recently enacted the Insolvency and Bankruptcy Code,
2016 ("Code") for the insolvency resolution of non- financial entities.
The proposed Bill complements the Code by providing a resolution
framework for the financial sector. Once implemented, this Bill together
with the Code will provide a comprehensive resolution framework for the
economy.
The Financial Resolution and Deposit Insurance Bill, 2017 seeks to give
comfort to the consumers of financial service providers in financial
distress. It also aims to inculcate discipline among financial service
providers in the event of financial crises by limiting the use of public
money to bail out distressed entities. It would help in maintaining
financial stability in the economy by ensuring adequate preventive
measures, while at the same time providing the necessary instruments for
dealing with an event of crisis. The Bill aims to strengthen and
streamline the current framework of deposit insurance for the benefit of
a large number of retail depositors. Further, this Bill seeks to
decrease the time and costs involved in resolving distressed financial
entities.
PIB
