Keeping in mind the ease of doing business in India and start-ups, the Rajya Sabha cleared two bills making the credit guarantee facility for bank depositors more efficient and to decriminalize limited liability partnerships (LLPs).
Union Finance Minister Nirmala Sitharaman told the Upper House that the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill will help small depositors, including those of the stressed Punjab & Maharashtra Co-operative (PMC) Bank.
Bank depositors get a maximum cover of Rs 5 lakh for their deposits, but often the payment in the event of a bank failure takes a long time. The bill seeks to ensure that this payment is made within 90 days, even when the bank is placed under a moratorium. It seeks to insert a section in the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 196, a1 to facilitate this. This is regarded as significant as several banks, including PMC Bank, Yes Bank and Lakshmi Bank had recently faced stress.
Sitharaman said the legislation would also help depositors of 23 cooperative banks that are under stress. She pointed out that PMC Bank depositors will also deposit from the bill. It also allows DICGC to raise the ceiling on the premium, with the prior approval of the RBI.
The Upper House also passed the Limited Liability Partnership (Amendment) Bill. It proposes to decriminalize 12 offences under the LLP Act and foster the ease of doing business in India. The decriminalized offences will get shifted to an internal adjudication mechanism to help unclog criminal courts from routine cases.
It should be noted that this bill provides for the formation of a small LLP where the contribution from partners is up to Rs 25 lakh, which can be increased up to Rs 5 crore. The turnover for the preceding financial year is up to Rs 40 lakh, which may be increase up to Rs 50 crore. The Central government may also notify certain LLPs as start-up LLPs. Furthermore, the bill seeks to amend the LLP Act to introduce the concept of ‘Small Limited Liability Partnership’ in line with the concept of ‘Small Company’ under the Companies Act, 2013.
The government gave the go ahead for the creation of a class of small LLPs to encourage entrepreneurs. These LLPs will be subject to fewer compliances, reduced fee or additional fee, and smaller penalties in the event of default.