- The Union Cabinet has approved the proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017.
- 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.
- The Financial Resolution and Deposit Insurance, Bill 2017 when enacted, will pave the way for setting up of the Resolution Corporation.
- It would lead to repeal or amendment of resolution-related provisions in sectoral Acts as listed in Schedules of the Bill.
- It will also result in the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 to transfer the deposit insurance powers and responsibilities to the Resolution Corporation.
- The Resolution Corporation would protect the stability and resilience of the financial system; protecting the consumers of covered obligations up to a reasonable limit; and protecting public funds, to the extent possible.
- 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.