Why Rajya Sabha is key for bankruptcy law to succeed and for depositors to relax
As the Winter Session of Parliament gets underway, India Inc and Indian bank depositors should keep a close eye on proceedings in the Rajya Sabha, where the fate of two important pieces of legislation could be decided.
#1 The ordinance amending the Insolvency and Bankruptcy Code, which disallows promoters of NPA-laden companies from buying back their own companies at the NCLT (or the National Company Law Tribunal) unless they pay up all their dues. If this ordinance is not passed, it could seriously derail the resolution of NPA cases in the bankruptcy courts.
#2 The Financial Resolution & Deposit Insurance Bill (or the FRDI Bill) which sets up a corporation to take charge of failing financial institutions. This law, it is feared , may allow the resolution corporation to use a weak bank’s deposits to recapitalise the bank. The finance minister has assured this is not the case. But depositors are panicky and would like a clear ring-fencing of their deposits in case a bank fails.
However controversial, both these legislations can sail through the Lok Sabha given the ruling coalition’s huge majority. But the question now is will they get majority support in the Rajya Sabha?
Here’s the party-wise split in the Rajya Sabha. The NDA and its allies, with 86 seats, are a good distance away from the asking majority of 121. If we add AIADMK & the TRS, it still amounts to 102. So the ordinance requires bipartisan support. If Left Front lends its support (and they ought to), the ordinance will sail through.
The FRDI Bill is sure to struggle. Members of the Biju Janata Dal and the CPM trashed it publicly. The Congress will go to town opposing it (never mind that this bill is a product of the Financial Sector Legislative Reforms Commission which was appointed by the Congress). But then again, this Bill is still with a parliamentary committee and may not come up at all.
However, the BJP can try and bulldoze both these pieces of legislation as money bills. It’s not beyond the pale of imagination.
Party-wise split of Rajya Sabha members
Source: Rajya Sabha websiteNDA-affiliated