Insolvency rules for FSPs: Regulator has more control than CoC, say experts

Experts say a separate framework for financial service providers is required to protect retail investors, and for systemic reasons

The government last week came up with an interim framework for resolving financial stress in financial service providers (FSPs) through a structured resolution and liquidation proceedings. Experts decode the implications of the insolvency rules for debt-laden financial entities, and how their treatment would be different from that of the corporate insolvency resolution process for manufacturing or services outfits.    

Why is there a need for a separate framework under the Insolvency and Bankruptcy Code (IBC) to deal with insolvency and liquidation proceedings for FSPs?

Financial service entities, generally banks, have a profile of creditors different from that of manufacturing or services concerns.