Does IBC work for financial firms?

The economy might be better off with a dedicated legal regime for the resolution of financial service providers and financial market infrastructure

Dewan Housing Finance Company Ltd. (DHFL) has become the first financial service provider (FSP) to undergo resolution under the new framework for FSPs. Regulated FSPs, such as banks, insurance companies, non-banking financial companies (NBFCs) etc. were initially kept outside the Insolvency and Bankruptcy Code, 2016 (IBC). It is evident from recent developments that the government has reconsidered this position. The IBC has been extended to NBFCs and housing finance companies (HFCs) with assets more than Rs 500 crore. Against this backdrop, it is worthwhile to understand why FSPs are unique and what could possibly go wrong if their resolution happens