Repay loans or lose ownership: Jaitley tells companies
Finance Minister Arun Jaitley has warned companies against defaulting on loans, asking them either to pay up or possibly lose ownership. Talking about the Insolvency and Bankruptcy Code, Jaitley said it has reversed the debtor-creditor relationship: earlier, the latter had to chase the former. "The IBC's intent is not liquidation of assets, but to preserve their value, either through existing promoters or new ones."
The dismal situation of India's insolvency problem
India stands at 136th spot in the World Bank's resolving insolvency chart and is trying to write off stressed debts; last year it wiped close to Rs. 114,000cr. As of now, the insolvency problem with private and public sectors' NPAs is running a tab of Rs. 6L crore. 4-5 years are taken to initiate and resolve insolvency and another 4-10 years for liquidation.
What does the Bankruptcy Code propose?
The Bankruptcy Code aims to hack down the resolution time, taken in a case of insolvency so that the dues of the creditors can be addressed within a 180-day period with a provision of a 90-day extension if agreed by majority of creditors. The Bankruptcy Code constitutes of three elements - institutional infrastructure, provisions relating to corporate insolvency transactions and individual insolvency transactions.
IBC's reach to soon expand to individuals
The IBC, the new bankruptcy law enacted last year, was only being applied to corporates and startups. But soon, individuals will come under its purview. Panels are now examining rules to be applied to individuals and partnership firms.
'Debtors servicing debts is only way to get business done'
Jaitley talked of when amendments to the Civil Procedure Code couldn't be passed when he was Law Minister during the Atal Bihari Vajpayee regime. He expressed hope the IBC doesn't meet a similar fate. "If a debtor has to survive, he will have to service his debt, or make way for somebody else. I think this is the only correct way to get business done."