'Bill to address bankruptcy in fin sector in next Par session'
The government is likely to introduce in the monsoon session of Parliament a separate bankruptcy law to deal with insolvency in financial sector companies that include banks and NBFCs.
The proposed bill will cover all financial service providers that include banks, NBFCs and microfinance institutions which have money deposited, a senior finance ministry official has said. The law will help safeguard the interest of depositors, he added. The Insolvency and Bankruptcy Code (IBC) 2016 was passed by Parliament last month to deal with cases of corporate or companies other than the financial sector.
"The proposed legislation for resolution of bankruptcy in financial firms are under works and our endeavor is to introduce in the upcoming monsoon session of Parliament," the official said.
"Financial firms by their nature and characteristics, have depositor money as well. So, an appropriate resolution process for orderly winding down of financial firms is not an easy process," the official said adding, extensive consultation with various stakeholders are on to make a watertight law.
A finance ministry committee has suggested a 'resolution corporation' to expeditiously deal with issues concerning insolvency of financial institutions, including banks and insurers. Draft code on resolution of financial firms also proposed to consolidate the existing laws relating to resolution of certain categories of financial institutions, including banks, insurance companies, financial market infrastructures, payment systems, and other financial service providers into a single legislation, and provide for additional tools of resolution to enable the resolution corporation to maintain the systemic stability in the country.
The proposed resolution corporation will contribute to the stability and resilience of the financial system by carrying out the speedy and efficient resolution of financial firms in distress, providing deposit insurance to consumers of certain categories of financial services and monitoring the systemically important financial institutions.