The
Sub-Committee of the Financial Stability and Development Council (FSDC)
constituted a high level Working Group, with Shri Anand Sinha, the then Deputy
Governor, RBI as Chairperson and Dr. Arvind Mayaram, Secretary, Department of
Economic Affairs, Ministry of Finance, Government of India as Co-Chairperson to
suggest extensive strengthening of the resolution regime taking into
consideration the structure of Indian financial institutions and the Financial
Stability Board’s Key Attributesof Effective Resolution Regime for Financial
Institutions. The Group has submitted its report to the
Governor, RBI and Chairman of the Sub-Committee of FSDC.
Today, there
are some provisions contained in various Acts governing the respective
financial institutions, which empower the respective regulator/supervisor
and/or the central government to resolve different types of financial
institutions in India once they run into viability problems. In order to bridge
the gaps and develop an effective resolution regime for all financial
institutions in line with the Key Attributes, the Group has made wide ranging
recommendations taking into consideration the international best practices and
work in major advanced jurisdictions as also the recommendations given by the
Financial Sector Legislative Reforms Commission (FSLRC).
The Group
emphasizes the need for a separate comprehensive legal framework providing the
necessary powers and tools to resolve all financial institutions irrespective
of ownership; and setting up of a single Financial Resolution Authority (FRA)
that is institutionally independent of regulators/Government. The Group also recommends
putting in place an early intervention mechanism in the form of a Prompt
Corrective Action (PCA) framework with clear trigger levels for regulatory
intervention in the early stages and for handing over to the resolution
authority for initiating appropriate actions in the last stage.
The Report
of the Working Group on Resolution Regime for Financial Institutions has today
been placed in the website of Ministry of Finance (MoF)/Reserve Bank of India
(RBI)/Securities and Exchange Board of India (SEBI)/Insurance Regulatory and
Development Authority (IRDA)/Pension Fund Regulatory and Development Authority
(PFRDA)/Financial Markets Committee (FMC) for inviting public comments. The
comments, if any, on the recommendations of the Report, may be e-mailed or sent by post to the Principal
Chief General Manager, Reserve Bank of India, Department of Banking Operations
and Development, 12thFloor, Central Office Building, Shahid Bhagat Singh Marg,
Fort, Mumbai – 400 001 on or before May 31, 2014.
Ajit Prasad
Assistant General Manager
Assistant General Manager
Press Release : 2013-2014/2118