Government Notifies insolvency law for financial service providers

In the backdrop of instances of various FSPs facing problems, the Corporate Ministry, Government of India on Friday (November 15, 2019) notified rules under the insolvency law to deal with the resolution of financial service providers, excluding banks. According to the statement of Corporate Ministry, the new rule “Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 (Rules)” notified by the Government will provide a generic framework for insolvency and liquidation proceedings of systemically important Financial Service Providers (FSPs) other than banks. “The special framework provided under Section 227 of the Code for financial service providers is essentially aimed at serving as an interim mechanism to deal with any exigency pending introduction of a full-fledged enactment to deal with the financial resolution of banks and other systemically important financial service providers,” the communique said.