MCA is coming out with a specific regulatory framework required to deal with the financial service providers, particularly NBFCs and HFCs
The government is preparing to allow lenders and other stakeholders to initiate insolvency and liquidation proceedings against the financial service providers under the Insolvency and Bankruptcy Code (IBC), in light of current financial stress in certain non-banking financial companies (NBFCs) and housing finance companies (HFCs).
The Ministry of Corporate Affairs (MCA) is in the process of coming out with a specific regulatory framework required to deal with the financial service providers, particularly NBFCs and HFCs. The ministry has recently set up a sub-committee under the Insolvency Law Committee headed by MCA secretary Injeti Srinivas to give recommendations in this regard.
"We are in consultation with the regulators to see if a separate special framework could be worked out to bring specified financial service providers under IBC," a senior official said.
NO CONTAGION
|
- MCA is coming out with a specific regulatory framework required to deal with the financial service providers, particularly NBFCs and HFCs
- The government is moving fast on the issue so that the crisis in certain NBFC-HFCs, particularly DHFL, is not spread across the financial sector
|
To bring the financial service providers under the IBC, the government will have to commence the section 227 of the Code. It stipulates that the central government has to notify financial services providers or categories of them for the purpose of their solvency and liquidation proceedings, to be conducted under the IBC.
The sub-committee has been tasked with notifying financial service providers under section 227 of the IBC.
The sub-committee will give recommendations on "the financial service providers or classes of them that can be notified..for the purpose of their insolvency and liquidation proceedings based on the input received from the Department of Economic Affairs (DEA) and other financial regulators, keeping the due consideration for the financial service providers to be covered under the proposed FRDI Bill so as to rule out any regulatory gap or overlap… to cover all FSPs."
The MCA will come out with a regulatory framework required for dealing with such financial service providers based on the recommendations of the sub-committee.
"In light of current financial stress in certain NBFCs and HFCs, the possibility of covering them under specific framework duly factoring the recent amendments made in the RBI Act, 1934, by Finance Act, 2019," according to the terms of references of the sub-committee.
The government is moving fast on the issue so that the crisis in certain NBFC-HFCs, particularly DHFL, is not spread across the financial sector.
Even as the Financial Resolution and Deposit Insurance Bill (FRDI) Bill is pending, the government wants to move quickly on applying the IBC to NBFCs and HFCs among other financial service providers. Last year, the government had to drop the FRDI Bill after much public outcry over the controversial bail-in clause. All the financial service providers had to be covered under it. The government is mulling to deal with the NBFCs under a different legal framework while other financial sector providers may be covered by the FRDI Bill.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "NCLT")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}