Government of India has approved the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017. This Bill is similar to the Insolvency and Bankruptcy Code, 2016, which was enacted last year in May.
These bills are introduced to curb the menace of Non Performing Assets (NPA). Insolvency and Bankruptcy Code, 2016 deals only with the companies that are in the financial sector where as the insolvency code Act deals with companies in all other sectors.
The FRDI will provide a comprehensive resolution framework to deal with bankruptcy situations in financial sector entities such as banks and insurance companies.
What the Bill offers ?
FRDI Bill, 2017 seeks to protect customers of financial service providers in times of financial distress. In the event of financial crisis this bill will be used to limit the use of public money to bail out distressed entities.
The Bill would help in
1. Maintaining financial stability in the economy
2. Ensure the adequate preventive measures, while dealing with crisis events.
3. This bill will strengthen the current framework of deposit insurance for the benefit of retail depositors.
4. It helps in resolving distressed financial entities.
5. A new resolution corporation will be setup to strengthen the stability and resilience of the entities in the financial sector.