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News:
- The Financial Resolution and Deposit Insurance Bill, 2017
Important facts:
2. The key features of the Bill:
- The Bill proposes a comprehensive resolution framework for specified financial sector entities and service providers.
- It will deal with bankruptcy in banks, insurance companies and financial sector entities.
- The Bill seeks to give comfort to the consumers of financial service providers in financial distress.
- Its objectives include the maintenance of financial stability during a crisis.
- The Bill lists 11 categories of institutions which would come under the definition of specified service providers.
- The Bill proposes the setting up of a Resolution Corporation by the Central government.
- It would lead to repeal or amendment of resolution-related provisions in legislation, including the repeal of the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
- This would mean the transfer of deposit insurance powers and responsibilities to the Resolution Corporation to streamline the deposit insurance framework for the benefit of retail depositors.
- The government listed the functions of the Resolution Corporation which includes:
- Protecting the stability and resilience of the financial system, public funds, and consumers of covered obligations up to a “reasonable limit”.
- The Bill also details the powers and functions of the Corporation , which are listed below:
- To include providing deposit insurance to banking institutions,
- specifying the criteria for classification of a specified service provider into one of the categories of risk to viability,
- acting as an administrator for a specified service provider under critical risk,
- exercising powers in relation to certain termination rights in respect of specified service providers,
- resolving a specified service provider under critical risk,
- Acting as a liquidator for a specified service provider.
- The recently enacted Insolvency and Bankruptcy Code, 2016 to deal with the insolvency resolution issues of non-financial entities will be complemented by the proposed Bill.