A committee headed by Finance Minister Arun Jaitley decided on Thursday decided to set up a resolution corporation (RC) to deal with the closure of financial companies. The move came a day after the finance ministry received a report on expediting the winding up of companies in general.
“It is proposed to set up a body (RC) in consultation with all stakeholders,” the ministry stated after the meeting.
An RC was proposed in the Financial Sector Legislative Reforms Commission report, as a code for insolvency and bankruptcy in financial companies. Setting up of an RC is based on the idea that the burden of failure of private financial entities should not be placed on customers, taxpayers and shareholders of public sector financial companies.
The meeting was attended by Minister of State for Finance Jayant Sinha, Reserve Bank governor Raghuram Rajan, chief economic adviser Arvind Subramanian, financial sector regulators and officials of the finance ministry.
It discussed action on the recommendations of task forces set up by the department of economic affairs on a Public Debt Management Agency (PDMA), Financial Sector Appellate Tribunal and Financial Data Management Centre (FDMC).
On PDMA, the meeting was apprised that the process of inter-ministerial consultation was on. On FDMC, to begin with, it is proposed to set up a body which would assist the existing Financial Stability and Development Council.
The meeting discussed the issue of rising bad loans in the banking sector. It noted the measures taken by government and the Reserve Bank for handling of stressed assets. "It also discussed the impact of bank NPAs (non-performing assets) and corporate sector balance sheet stress on the bond market," the ministry statement added.
High volatility in the financial markets was also discussed. While India appears much better placed, with improvement in its macro economic fundamentals and large foreign exchange reserves, a cushion against financial markets' volatility, “Members agreed on the need to continue to be in a state of full preparedness for managing any external sector vulnerabilities,” went the statement.
The panel also discussed the recommendations of an Inter-ministerial Group to identify gaps in the existing regulatory framework for deposit taking. The department of financial services is considering the recommendations.
The council was also updated about merger of the Forward Markets Commission into the Securities and Exchange Board of India, and the status of harmonisation of regulations relating to the securities and commodity derivatives markets.
