Insolvency and Bankruptcy Code 2016 Current Affairs
Union Cabinet approves Proposal to introduce the Financial Resolution and Deposit Insurance Bill 2017
The Union Cabinet has approved the proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017 which will provide a comprehensive resolution framework for financial sector entities to deal with bankruptcy situation in banks, insurance companies, and other entities.
The bill will pave way for the establishment of Resolution Corporation. The Resolution Corporation would be mandated to protect the stability and resilience of the financial system; protecting public funds; protecting the consumers of covered obligations up to a reasonable limit.
Once enacted, the Financial Resolution and Deposit Insurance, Bill 2017 will result in repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 and repeal/amendment of other resolution related provisions in sectoral acts. With the repeal of Deposit Insurance and Credit Guarantee Corporation Act, 1961, the deposit insurance powers and responsibilities will be transferred to the proposed Resolution Corporation.
The new bill will complement the Insolvency and Bankruptcy Code, 2016 by providing a comprehensive resolution framework for the financial sector. The Insolvency and Bankruptcy Code, 2016 was enacted recently to deal with the insolvency of non- financial entities.
The bill envisages to inculcate discipline among financial service providers in the event of financial crisis. It is expected to maintain financial stability in the economy by limiting the use of public money to bail out distressed entities. It will put in place adequate preventive measures and at the same time proposes to provide the necessary instruments for dealing with an event of financial crisis
The bill is proposed to be enacted to strengthen and streamline the current framework of deposit insurance and to decrease the time and costs involved in resolving distressed financial entities.
The Insolvency and Bankruptcy Board of India (IBBI) has set up two high-level advisory committees to gather inputs from experts, including on service providers and corporate liquidation.
IBBI has been set up under the Insolvency and Bankruptcy Code, 2016 and is expected to soon operationalize. The two committees have begun their deliberations.
- The advisory committee on services: It will be headed by educationist Mohandas Pai. It includes National Stock Exchange Vice-Chairman Ravi Narain, SEBI Executive Director J Ranganayakulu, National Institute of Public Finance and Policy’s Professor Ajay N Shah and senior lawyer Amarjit Singh Chandiok.
- The advisory committee on corporate insolvency and liquidation: It will be headed by noted banker Uday Kotak. It includes Credit Information Bureau Chairman M V Nair, Corporate and Economic Research Group Advisory’s Chairperson Omkar Goswami and BSE CEO Ashishkumar Chauhan.
- IBBI seeks to consolidate and amend laws relating to reorganisation as well as insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.
- It has been set up by the code to regulate professionals, information utilities (IUs) and agencies engaged in the resolution of insolvencies of companies.
- It has chairman and 10 members. Present chairman is M S Sahoo. There four government-nominated members.