Insolvency and Bankruptcy Code, 2016 | Special provisions

Section 227 IBC: Power to Notify Financial Service Providers for Insolvency Proceedings

Section 227 authorises the Central Government, in consultation with the appropriate financial sector regulators, to bring specified financial service providers or categories of providers within a specially prescribed insolvency and liquidation framework under the Insolvency and Bankruptcy Code, 2016.

Text of Section 227 - Power of Central Government to notify financial service providers, etc.

227. Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the Central Government may, if it considers necessary, in consultation with the appropriate financial sector regulators, notify financial service providers or categories of financial service providers for the purpose of their insolvency and liquidation proceedings, which may be conducted under this Code, in such manner as may be prescribed.

The original uploaded page reproduced this provision with the word "examined" where the statutory formulation is "contained". The wording above corrects that apparent transcription error. Consult the India Code legislation database for the authoritative consolidated statute.

Meaning and legal effect of Section 227

Ordinarily, the Code excludes financial service providers from the definition of corporate person in Section 3(7). Section 227 creates an express statutory route for specially notified financial service providers to undergo insolvency or liquidation proceedings under the Code, subject to prescribed modifications and safeguards. It does not automatically subject every bank, insurer or other regulated financial entity to the ordinary corporate insolvency process.

Financial service provider: Under Section 3(17), a person engaged in the business of providing financial services in terms of authorisation issued or registration granted by a financial sector regulator. Financial service: Section 3(16) identifies regulated financial activities such as accepting deposits, safeguarding and administering financial products, and effecting contracts of insurance, among other activities. Financial sector regulator: Section 3(18) includes the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority and other notified regulators.

Conditions for invoking Section 227

Central Government notification: The provider or category must fall within a notification issued under Section 227.
Regulatory consultation: The Central Government must consult the appropriate financial sector regulator before issuing the notification.
Prescribed procedure: Proceedings are governed by the applicable rules framed for notified financial service providers, not simply every ordinary corporate debtor rule without modification.
Applicable jurisdiction: The Adjudicating Authority and procedural safeguards are determined by the Code, notification and applicable rules.

Financial Service Providers Insolvency and Liquidation Rules, 2019

The Central Government issued the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 to prescribe a specialised procedure for notified financial service providers. Under this framework, the relevant regulator has a central role, including the initiation of insolvency proceedings for the covered category and consultation in the appointment of the administrator. The applicable rules also address the administrator, interim moratorium, treatment of third-party assets and liquidation-related safeguards.

These rules must be read together with the particular notification and any relevant directions of the financial sector regulator. The ordinary creditor-initiated process applicable to a typical corporate debtor should not be assumed to apply unchanged to a notified financial service provider.

Example: notified non-banking financial companies

The Central Government's 2019 notification under Section 227 brought within the special framework certain non-banking financial companies, including housing finance companies, with asset size of Rs. 500 crore or more, as per the last audited balance sheet, for the relevant class of proceedings. The RBI is the appropriate financial sector regulator for this notified class. The precise scope, threshold and legal position must be checked against the current notification and any subsequent amendments before determining whether a particular entity is covered.

Important distinction: The existence of an RBI or other financial regulator registration alone does not establish that a financial service provider is covered by Section 227. A qualifying notification and the applicable rules are essential.

How Section 227 differs from ordinary corporate insolvency

Issue	Ordinary corporate debtor	Notified financial service provider
Coverage	Corporate persons within the Code's general definitions.	Only categories brought within the special framework by government notification.
Commencement	Eligible financial creditors, operational creditors or the debtor may initiate under the applicable provisions.	The appropriate regulator initiates under the specialised 2019 rules for covered entities.
Interim management	Interim resolution professional under the general CIRP framework.	Administrator appointed through the special rules, with regulatory involvement.
Regulatory protections	General Code safeguards.	Additional sector-specific safeguards, including treatment of third-party assets, where applicable.

Section 3(7): Definition of corporate person and exclusion of financial service providers. Sections 3(16), 3(17) and 3(18): Definitions of financial service, financial service provider and financial sector regulator. Section 227: Central Government power to notify financial service providers. Section 228: Power of the Central Government to make rules in respect of financial service providers. These provisions should be read together with the relevant 2019 rules and notification.

Frequently asked questions

Are all financial service providers covered by the IBC insolvency process?

No. Section 227 operates through Central Government notifications identifying the covered providers or categories and the applicable special procedure.

Can a creditor directly file an ordinary CIRP application against a notified financial service provider?

The 2019 special rules assign commencement of the prescribed process to the appropriate regulator for the notified category. The position must be assessed under the operative notification and rules rather than the general creditor-filing provisions alone.

Does Section 227 replace financial sector regulation?

No. The provision expressly requires consultation with the appropriate financial sector regulators, and the specialised insolvency rules preserve a significant regulatory role.

Is Section 227 limited to NBFCs?

The enabling statutory language is broader. The scope of actual application depends on the categories notified by the Central Government from time to time.

Official legislation, rules and regulatory sources

Reviewed October 23, 2026. This article explains the legal framework; check the latest official notification and rules for any specific provider.