Banking Institutions Insolvency Regime in India – A Glance at The Financial Resolution and Deposit Insurance Bill 2017

Abstract

Taking into account the lacuna in the resolution framework, Indian bankruptcy and insolvency related regulations recently underwent a major overhaul when the Insolvency and Bankruptcy Code, 2016 was enacted in India and the draft of the Financial Resolution and Deposit Insurance Bill 2017 was introduced. The focus in the coming years would have been on these two pieces of legislation to save the deteriorating condition of the Indian economy. However, this was not to be. The draft Financial Resolution and Deposit Insurance Bill 2017 was withdrawn from the parliament of India in July 2018.

The draft Financial Resolution and Deposit Insurance Bill 2017 dealt with the Indian economic and financial sectors which have started cracking under the pressure of bad loans and the distressed banks. It introduced concepts such as the bail-in provision, the bridge service provider, formulation of a central resolution corporation, which haven’t yet been used in the Indian banking scenario. The draft Financial Resolution and Deposit Insurance Bill 2017 focused on the age-old locution – ‘prevention is better than cure’ thus looking at saving the distressed entities before they head for insolvency.

Through this piece of research, the author examines the draft Financial Resolution and Deposit Insurance Bill 2017 while also giving a background on its withdrawal.