Wealth managers, insurance brokers, merchant bankers and share transfer agents may soon be under the ambit of Insolvency and Bankruptcy Code (IBC), even as the Centre has decided to keep banks, insurance companies and pension funds out of it, at least for the time being.

Officials said there would be 30-40 categories of financial intermediaries who would come under the scope of the law after the government extended it to financial services. So, far only non-bank finance firms with assets of over Rs 500 crore have been brought within the scope of IBC. Other financial regulators such as Sebi and insurance and pension regulators will identify intermediaries regulated by them, which will be brought into the IBC fold in case they face distress.

On Thursday, Sebi chairman Ajay Tyagi had said that mutual funds will be part of the list. The need to bring financial sector entities under the IBC was necessitated due to the absence of any law focused on one of the most critical segments of the economy. While the government had introduced the Financial Resolution and Deposit Insurance (FRDI) Bill to deal with resolution of stressed financial sector entities, it withdrew the bill amid fears that depositors’ money may be used to bail out distressed entities. Officials said the government does not intend to introduce the FRDI Bill at the moment and the market-based resolution framework will not apply to banks, insurance underwriters and pension funds.

“In India, the government and RBI are not going to allow the collapse of a bank,” said a source, explaining the rationale. It is, however, working on a plan to increase the insurance cover beyond the current level of deposits of up to Rs 1 lakh, finance minister Nirmala Sitharaman had said last week. Another officer said that financial sector entities have been divided into various categories. While the first one will include banks, insurers and pension funds, which are outside the ambit, a second category will comprise entities such as NBFCs with over Rs 500 crore assets and other intermediaries that would be notified. #casansaar (Source - TNN, Times of India)