Financial Resolution and Deposit Insurance Bill, 2017

• In line with the bankruptcy code for non-financial firms, the Cabinet has approved the proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017 that will provide for a comprehensive resolution framework for specified financial sector entities to deal with bankruptcy situation in banks, insurance companies and financial sector entities.

Highlights of the Bill:

• It will pave the way for setting up of the Resolution Corporation that would protect the stability and resilience of the financial system; protecting consumers of covered obligations up to a reasonable limit; and protecting public funds, to the extent possible.
• The government recently enacted the Insolvency and Bankruptcy Code, 2016 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,” the government said.
• 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.

By: Vishal