The Bilateral Netting of Qualified Financial Contracts Act, 2020

Bilateral Netting of Qualified Financial Contracts Act, 2020

The Bilateral Netting of Qualified Financial Contracts Act, 2020 (the "Act") aims to ensure financial stability and promote competitiveness in Indian financial markets by providing enforceability of bilateral netting of qualified financial contracts. The Act is enacted to address the need for greater stability and efficiency in the financial sector.

Key Provisions

The Act provides for the application of certain laws and regulations, including those related to banking, insurance, securities, and pension funds. It also establishes a framework for close-out netting, which involves the termination of obligations under a qualified financial contract with a party in default and the subsequent combining of positive and negative replacement values into a single net payable or receivable.

Key Sections

• Section 3: Applicability of Act


• Section 4: Powers of authority


• Section 5: Enforceability of netting


• Section 6: Invocation of close-out netting


• Section 7: Net amount

Schedules

The Act includes two schedules:

1. The First Schedule lists the authorities that regulate qualified financial market participants.


2. The Second Schedule lists the enactments that override other laws in relation to this Act.

Key Dates

The Act comes into force on a date specified by the Central Government, which may vary depending on the provision of the Act.