Bank Liquidation Should Be Handled by IBBI-Certified IPs Under RBI-DICGC Oversight: Study
A study commissioned by the Insolvency and Bankruptcy Board of India (IBBI) has proposed that the liquidation of banks should be handled by IBBI-certified Insolvency Professionals (IPs), while remaining under the oversight of the Reserve Bank of India (RBI) and Deposit Insurance and Credit Guarantee Corporation (DICGC). The proposal seeks to bring greater professionalisation and standardisation to the process of resolving failed banks, while retaining the specialised regulatory oversight required for the banking sector.
The study reportedly examines the existing framework for bank liquidation and depositors’ interests, suggesting that certified insolvency professionals could bring specialised expertise in valuation, asset realisation, creditor coordination and liquidation processes. At the same time, RBI and DICGC oversight would remain important because bank failures involve issues beyond ordinary corporate insolvency, including financial stability, depositor protection and regulatory compliance. The proposed model therefore envisages a combination of insolvency expertise and financial-sector supervision.
The recommendation has wider implications for bank resolution and financial risk management. A clearly defined framework could help establish accountability, improve the efficiency of asset resolution and provide greater clarity over the roles of regulators and insolvency professionals when a bank fails. However, the proposal is a recommendation from the study and should not be interpreted as an immediate change to India’s bank-liquidation framework. Any such change would require appropriate regulatory and legal action.
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