NEW DELHI: The government is planning to introduce a Bill which seeks to give comfort to the consumers of financial service providers in financial distress.
The Union Cabinet chaired by the Prime Minister Narendra Modi on Wednesday approved a proposal to introduce the Financial Resolution and Deposit Insurance Bill, 2017.
The Bill seeks to 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 government had recently enacted the Insolvency and Bankruptcy Code for the insolvency resolution of non-financial entities. The newly proposed Bill will complement 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,” said a government release.
The Bill will also pave the way for setting up a Resolution Corporation, whose role will be to protect the stability of the financial system, consumers of covered obligations up to a reasonable limit, and public funds.
The Bill will also 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 government said.
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 cut down on the time and costs involved in resolving distressed financial entities.