Govt paves way for insolvency resolution of financial service providers

Insolvency proceedings will be initiated only on an application by the appropriate regulator, who will be notified by the MCA, depending upon the FSP

Paving the way for the resolution of debt-laden entities such as Dewan Housing Finance (DHFL), the government on Friday notified the rules for insolvency and liquidation proceedings of financial service providers (FSPs). These rules, notified by the Ministry of Corporate Affairs (MCA), will not be applicable to banks. The government is yet to notify the categories of FSPs to be covered by the notification.

“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