LS passes Bill for legal framework to bilateral netting of QFCs

New Delhi, Sep 20 (IANS) The Lok Sabha on Sunday unanimously passed a Bill which seeks to provide a legal framework for bilateral netting of Qualified Financial Contracts (QFC) which are over-the-counter derivatives contracts.

The Bilateral Netting of Qualified Financial Contracts Bill, 2020, introduced in Lok Sabha on September 14, allows for enforcement of netting for QFCs.

Speaking on the Bill, Minister of State for Finance and Corporate Affairs Anurag Thakur said it ensures financial stability and promotes competitiveness in Indian financial markets by providing enforceability of bilateral netting of qualified financial contracts. The Central government may, by notification, exclude contracts between certain parties or containing certain terms from being designated as QFCs.

The provisions of the Bill will apply to QFCs 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). The Bill provides that netting of QFCs is enforceable if the contract has a netting agreement — an agreement that provides for the netting of amounts involving two or more QFCs. A netting agreement may also include a collateral arrangement.



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