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Modi 3.0 legislative plan: IBC changes, financial registry, composite insurance, on 100-day agenda

Submitted by admin on April 18th, 2024

The Narendra Modi government is confident in coming back to power for the third time. Hence, they have drafted a busy legislative plan as a part of their first 100-day agenda, which mentions forming a national financial information registry, and major amendments to the insolvency and insurance laws, as per the official sources.

The National Financial Information Registry or NFIR bill is ready to be introduced in Parliament. The bill seeks to create a 360-degree information system that will be made available to lenders to accelerate the process and cost of credit.

NFIR is likely to be held jointly by the lending institutions. The banks will ask for the consent of individuals or enterprises, who are looking for a lower interest rate, to access data and details about their business volume, GST paid, electricity consumed, etc, from NFIR. If the concerned party is not willing to give consent for data access, the individual or entity will likely be asked to take loans against collateral. In that case, loans will likely be costlier.

Similarly, the Modi 3.0 legislative plan is likely to launch composite insurance licenses, captive insurance, and differential minimum capital as a part of their agenda on important reforms in the insurance sector.

According to the Insurance Act, of 1938, and the regulations of the Insurance Regulatory Development Authority of India (IRDAI), composite licensing is not allowed for an insurer to undertake general, health, or life insurance under a single entity. Launching composite licensing will likely give a fillip to the insurance sector due to its many benefits including cost reduction and absence of compliance hassles for insurance companies. It will also provide customers with more options and value, such as a single policy covering health, life, and savings.

To promote microinsurance which has a crucial role to play in poverty alleviation and financial inclusion, lower capital requirement is likely to be lowered further than the mandated requirements of a minimum of Rs 100 crore, for such players. The Bill to amend the Insurance Act and IRDAI Act, drafted after consultation with stakeholders, is almost ready.

Besides, the government will probably introduce a bill to make amendments to the Insolvency and Bankruptcy Code (IBC) to introduce group insolvency and cross-border norms. It is a part of their agenda to streamline insolvency law further. It will also seek to eliminate the interim moratorium for personal guarantor assets and introduce project insolvency under a real estate and creditor-led resolution plan (CLRP).

Group insolvency is combining the assets and liabilities of all enterprises in a corporate group and taking up resolution proceedings ahead of personal dealing with every single firm.

Currently, the IBC does not have any instrument to restructure firms handling cross-border jurisdictions. With no legislative framework in place, the National Company Law Tribunal decides the cases involving any cross-border elements and the resolution of groups on an ad-hoc basis.

Introducing these ideas, a holistic legislative framework would plug certain key gaps in the insolvency jurisprudence.

In recent times, Prime Minister Narendra Modi asked his ministers to hold meetings with secretaries and other officials of the respective ministries to make the new government’s first 100-day agenda ready.

Cabinet Secretary Rajiv Gauba met secretaries for discussion in this regard.