A proposal to introduce a Bill in Parliament for setting up a comprehensive resolution framework, to handle any bankruptcy of banks, insurers and financial services entities, yesterday received the Cabinet go-ahead.
The Financial Resolution and Deposit Insurance Bill, 2017, aims to instil discipline in financial service providers in the event of a financial crisis by limiting the use of public money to bail out distressed entities, reported Press Trust of India citing an official statement.
According to the statement, the Bill when enacted will pave the way for setting up the Resolution Corporation.
The Resolution Corporation would ensure the stability and resilience of the financial system, protecting consumers of covered obligations up to a reasonable limit.
In 2016, lawmakers enacted the Insolvency and Bankruptcy Code for the insolvency resolution of non-financial entities.
The proposed Bill complements the Code by providing a resolution framework for the financial sector.