In August 2017, a rather innocuous-sounding Financial Resolution and Deposit Insurance (FRDI) Bill was introduced in the Lok Sabha. After t...
In August 2017, a rather innocuous-sounding Financial Resolution and Deposit Insurance (FRDI) Bill was introduced in the Lok Sabha. After the Bill was introduced it was referred to a Joint Committee of members belonging to the Lok Sabha as well as the Rajya Sabha.
The major objective of the Bill was to provide a framework which went beyond just the failure of banks and look for a resolution for the bad loans plaguing financial institutions. This included NBFCs, insurance companies, regional or cooperative banks, mutual or pension funds, a payment system operator and a securities firm.298
The basic idea behind the Bill was to establish an all-encompassing Resolution Corporation. In case a financial service provider was staring at failure, the Resolution Corporation had the power to liquidate the firm or acquire and transfer its assets to another healthy firm, and thus carry out a merger.
The different segments of India’s financial sector were overseen by different regulators. Each of these regulators was set up by a different Act. The intention of the FRDI Bill was to amend around twenty such laws and bring the resolution function – when a financial service provider was staring at failure – under one umbrella of the Resolution Corporation.
