Mumbai, Jan 25 (KNN) According to N.S. Vishwanathan, Deputy Governor, Reserve Bank of India (RBI), said the central bank is engaged in setting up a financial sector resolution corporation.

While expressing about the discussion with government, he said its ambition is to provide resolution rather than just to provide insurance to financial companies.

According to the deputy governor while non-financial sector companies had the Insolvency and Bankruptcy Code (IBC) to deal with resolution, the proposed corporation would help to protect financial sector companies.

A government panel had released a draft law on financial sector resolution, back in September 2016. 

This draft had suggested setting up a corporation to manage resolution. And it had also said that once the Financial Resolution and Deposit Insurance Bill, 2016 was enacted, the Deposit Insurance and Credit Guarantee Corporation (DICGC) could be dissolved and all its functions passed on to the new corporation.

He further said that the regulator had already put measures to de-risk bank balance sheets by reducing excessive exposure to large corporate accounts.

Stressing over the innovation he said there should be exploratory efforts on what needs to be regulated, how it will be regulated in a way that innovation is not undermined.

According to RBI in December 2016, it would cap banks’ exposure to a group of connected companies at 25% of the lenders’ core capital, seeking to reduce concentration risk in a banking industry loaded with bad loans.

The central bank lowered the limit from 40% of the banks’ total capital funds, which include both Tier 1 (core) and Tier 2 capital, and gave banks until 2019 to meet the new norms.

RBI is also looking at the financial technology space and assessing the impact that it could have on various kinds of financial services. (KNN)