The Union Cabinet on Wednesday approved the introduction of a new Bill to resolve bankruptcy cases affecting financial sector entities, including banks and insurance companies.
The Financial Resolution and Deposit Insurance Bill 2017, when enacted, will have a provision for the setting up of a Resolution Corporation, and would also see the repealing or amendment of several resolution-related provisions in Acts pertaining to the particular sectors. The passage of the Act will also lead to the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 in order to transfer the deposit insurance powers and responsibilities to the Resolution Corporation.
The Bill seeks to decrease the time and costs involved in resolving distressed financial entities and complements the Insolvency and Bankruptcy Code, 2016 for the insolvency resolution of non-financial entities, according to an official statement. “Once implemented, this Bill together with the Code will provide a comprehensive resolution framework for the economy.”
It aims to limit the use of public money to bail out distressed firms during a financial crisis.
