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Parliament passes Bilateral Netting of Qualified Financial Contracts Bill

Parliament has passed the Bilateral Netting of Qualified Financial Contracts Bill, 2020 with Rajya Sabha approving it today. The bill provides a legal framework for bilateral netting of qualified financial contracts. Netting refers to offsetting of all claims arising from dealings between two parties to determine a net amount payable or receivable from one party to another. The bill allows for enforcement of netting for qualified financial contracts. The provisions of the bill will apply to Qualified Financial Contracts between two qualified financial market participants where at least one party is an entity regulated by the specified authorities RBI, SEBI, IRDAI, PFRDA or the IFSCA.

Replying to a discussion on the bill, Finance Minister Nirmala Sitharaman said that it is critical for financial stability in the country and will provide legal basis for bilateral netting between two parties. She said, several lessons were learnt by the 2008 global financial crisis and multiple regulations have been made to ensure the financial stability. She said, this bill will also ensure liquidity in the market.

Initiating the discussion, Suresh Prabhu of BJP termed this bill as forward looking saying that it will lead to creation of a dynamic financial market which will generate millions of jobs in the country. He said, the financial market is the backbone of any economy. Echoing the same view, another party MP Mahesh Poddar said that focus on the financial market is essential to make India a five trillion dollar economy.    

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