The government is set to withdraw the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 following persistent opposition and widespread concern over the controversial ‘bail-in’ clause.
The union cabinet gave its nod to the withdrawal of the bill on Wednesday, people aware of the development told ET. The cabinet on Wednesday also approved the Insolvency and Bankruptcy Code (IBC) Amendment Bill 2018 that will replace the ordinance the government had promulgated to recognise homebuyers as financial creditors to real estate developers.
The FRDI bill, introduced in the Lok Sabha on August 11, 2017, is currently with a joint committee of Parliament. The committee was to submit its report by the last day on the monsoon session of Parliament that began on Wednesday. The session will end on August 10. The bill provides a framework for resolution of failed financial business, which is not covered by the Insolvency and Bankruptcy Code.
The bill proposed to set up a resolution corporation that will look after the process and prevent banks from going bankrupt by “writing down of the liabilities” — a phrase that many experts have interpreted as a bail-in. Resolution Corporation was to be empowered to cancel the liability of a failing bank or convert the nature of the liability, a provision that is seen harming depositors as they would lose money in case of bankruptcy.
The government has repeatedly said deposits are protected.
The IBC amendment bill will be tabled in Parliament in the ongoing monsoon session.
“Government moves to make insolvency resolution more transparent, efficient and equitable; approves Insolvency and Bankruptcy Code (Amendment) Bill, 2018,” government spokesperson Sitanshu Kar tweeted on Wednesday. A senior government official said the amendment bill is on the lines of the ordinance issued in May this year. The ordinance provided that homebuyers will get due representation in the committee of creditors (CoC) that takes a call on resolution proposals, making them an integral part of the resolution process.
The ordinance also provides some reliefs for micro, small and medium enterprises (MSMEs). Promoter of a bankrupt MSME undergoing resolution can bid for his enterprise, provided the person is not a wilful defaulter and does not attract other disqualifications not related to default.
Source: July 19, 2018, Economic Times