Major Bills to reform labour, financial sector laws introduced in Lok Sabha

Business Line, August 10, 2017

Two critical Bills — one consolidating the labour laws around wages and the other introducing specialised resolution process for failing financial services providers — were introduced in the Lok Sabha on Thursday.

Besides seeking to amalgamate, simplify and rationalise four central labour enactments relating to wages, the ‘The Code on Wages Bill 2017’ would also widen the scope of minimum wages to all workers (including those in the unorganised sector), Union Labour Minister Bandaru Dattatreya told the Lok Sabha while introducing the Bill.

The four central labour enactments relating to wages that are to be amalgamated are the Payment of Wages Act 1936; The Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act 1976.

The government also took a big step towards ushering in a specialised resolution process for failing financial services providers, thereby contributing to the stability and resilience of financial system.

For this purpose, a new Bill – The Financial Resolution and Deposit Insurance Bill 2017 —was introduced in the Lower House by Arjun Ram Meghwal, Minister of State for Finance. This Bill was later referred to a Joint Committee of the Houses consisting of 30 members, 20 from Lok Sabha and 10 from the Rajya Sabha.

The Opposition parties’ MPs in the lower house were upset on two counts — both these Bills were circulated at 9 am on Thursday and secondly the Financial Resolution Bill was being referred to the Joint Committee of Houses instead of a Standing Committee on Finance. At present, there is no specific law in India for resolution of failures of financial services providers. The recently enacted Insolvency and Bankruptcy Code 2016 does not automatically cover financial service providers.

This new Financial Resolution Bill will seek to regulate financial service providers including banks (not cooperative banks), insurance companies, financial market infrastructure, payment systems, non-banking finance companies so as to comply with the emerging international norms for establishing effective resolution regime for financial sector, official sources said.

The proposed Financial Resolution and Deposit Insurance Bill 2017 together with the Insolvency and Bankruptcy Code 2016 is expected to provide a comprehensive resolution mechanism for the Indian economy with the objective of protecting consumers of specific service providers and public funds, official sources said.

The Financial Resolution Bill will also pave the way for creation of Resolution Corporation and confer on it certain new methods of resolution such as bail-in and bridge service provider.

SBI consolidation

Meanwhile, Lok Sabha on Thursday also gave its nod for a Bill enabling the consolidation of the SBI associate and Subsidiary Banks with the parent bank State Bank of India.

Although the consolidation has been effective from April 1, the legal sanctity for this arrangement is now being provided.

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