Is your financial service provider likely to fail? With banks being gripped by huge NPAs and bad loans, are you afraid you may lose your deposit? The “ayes” can now submit their views, suggestions and concerns to Parliament by way of a memorandum to the Joint Parliamentary Committee of the Lok Sabha and the Rajya Sabha.
The committee has been tasked to go into the Financial Resolution and Deposit Insurance Bill, 2017, which Finance Minister Arun Jaitley introduced in Parliament at 9am on August 10, a day before the session was to adjourn sine die. The move took MPs from the treasury benches as well as the opposition by surprise.
The Bill provides for setting up of a Resolution Corporation to protect consumers of specified service providers and of public funds, in order to ensure the stability and resilience of the financial system. Thus, it will regulate financial service providers like banks, insurance companies, capital markets infrastructure and NFBCs.
Rajya Sabha MP Bhupender Yadav will head the committee, which will examine the representations by the public, among other things, before reporting to Parliament. Government will maintain the confidentiality of such memorandum and also afford those who want to personally represent the opportunity to appear before it.
The Bill is seen as a big step towards protecting people and institutions and providing the much needed stability and resilience in the financial system, and, therefore, a major financial sector reform. More so when we take into account the Insolvency and Bankruptcy Code, 2016.
According to the draft bill, it seeks to provide for the resolution of certain categories of financial service providers in distress, deposit insurance to consumers of certain categories of financial services and designation of systematically important financial institutions, among other things.
The Resolution Corporation, in consultation with the respective regulators like RBI for banks and IRDA for insurance, specify criteria for classifying service providers based on their risk of failure. For example, 'low' categorisation would imply probability of failure substantially below acceptable levels, and 'critical' will mean the service provider is on the verge of failure.
The Bill provides for resolution by transferring assets and liabilities of the service provider to another person, merger or acquisition and if necessary, liquidation. It provides time-bound resolution by the Resolution Corporation, which gets an year from the date of categorisation.
The Bill also specifies penalties for concealment of property, destruction or falsification of evidence.
The last date for filing the memorandum or sharing views on this government with the Joint Parliamentary Committee is September 29.
