Financial Resolution and Deposit Insurance Bill to deal with crisis in banks

 

To protect the stability and resilience of the financial system, protect public funds and obligations of consumers up to a reasonable limit, the Union Cabinet approved a proposal Wednesday to introduce the Financial Resolution and Deposit Insurance Bill, 2017 that will pave the way to set up a Resolution Corporation to deal with bankruptcy in banks, insurance companies and financial entities.

The proposed law can benefit a large number of retail depositors because the Bill not only aims to strengthen and streamline the current framework of deposit insurance, but also seeks to decrease the time and costs involved in resolving distressed financial entities.

It seeks to give comfort to consumers of financial service providers during financial distress, and aims to instill discipline among financial service providers in the event of a financial crisis by limiting the use of public money to bail out distressed entities. This will help in maintaining financial stability in the economy by ensuring adequate preventive measures, and at the same time provide necessary instruments to deal with an event of crisis.

 


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