Govt notifies rules under insolvency law for resolution of financial service providers

News:The Ministry of Corporate Affairs (MCA) has notified the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules,2019.

Facts:

About the rules:

• The rules allow the insolvency and liquidation process to be undertaken against systemically important financial service providers(FSP) so long as such proceedings are triggered by the concerned regulator.However, these rules will not be applicable to banks.
• Depending upon the FSP,the regulator could be the Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi) or Insurance Regulatory and Development Authority.
• The regulator will appoint an administrator and will supervise the entire process.The administrator would have the same duties and powers of an insolvency professional, interim resolution professional, resolution professional or liquidator as the case may be.
• The concerned regulator may also constitute an Advisory Committee of three or more experts to advise the administrator in the operations of the FSP during the resolution process.
• However,unlike the corporate insolvency process,the moratorium period for FSPs will begin as soon as the application for insolvency is filed by the regulator.
• The licence or registration which allows the financial service provider to run its business will not be quashed during the insolvency process.

Additional information:

About Financial service providers(FSP):

• Financial Services providers is a term used to refer to the services provided by the finance market.
• It is also used to describe organizations that deal with the management of money.Examples are the Banks, investment banks, insurance companies, credit card companies and stock brokerages.