The Bilateral Netting of Qualified Financial Contracts Act, 2020.

Last updated: 30 September 2020

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The Bilateral Netting of Qualified Financial Contracts Act, 2020, has been enacted to bolster financial stability and enhance competitiveness within India's financial markets. This legislation ensures the enforceability of bilateral netting for qualified financial contracts. It defines key terms like 'close-out netting' and 'qualified financial market participant' and outlines the conditions under which netting agreements are enforceable, even in cases of insolvency.

MINISTRY OF LAW AND JUSTICE (Legislative Department) New Delhi, the28th September,2020/Asvina6,1942 (Saka) The following Act of Parliament received the assent of the President on the 28th September, 2020 and is hereby published for general information: THE BILATERAL NETTING OF QUALIFIED FI

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FAQ :

The Act aims to ensure financial stability and promote competitiveness in Indian financial markets by making bilateral netting of qualified financial contracts enforceable.

The Act came into force on a date appointed by the Central Government through a notification in the Official Gazette. Different dates may be appointed for different provisions.

Close-out netting is a process that involves terminating obligations under a qualified financial contract with a party in default and then combining positive and negative replacement values into a single net payable or receivable.

This includes entities regulated by the Reserve Bank of India (like banking institutions and NBFCs), SEBI, IRDAI, PFRDA, IFSCA, and other entities notified by the relevant authority.

Yes, close-out netting is enforceable against an insolvent party and any guarantor or person providing collateral, and it is not affected by the appointment of an administration practitioner or other insolvency-related proceedings.

No, an administration practitioner cannot render ineffective any transfer, payment, or delivery obligation under a netting agreement on grounds such as preference or undervalue transfer.