Govt devising ways to allow easy exit to investors from bankrupt companies
Updated: Sep 12, 2014 01:14:38pm
New Delhi, Sept 12 (KNN) With a view to strengthening the debt recovery process, the government is thinking of devising ways to allow easy exit route to entrepreneurs of bankrupt companies for faster wind-up.
The legislation is likely to be introduced by the time of the presentation of the next Union Budget in February, according to a media report.
Entrepreneurs as well as regulators have sought a better bankruptcy system in the country so that investors are able to recover their money at the earliest.
Recently, RBI Governor Raghuram Rajan had said that, there is a pressing need to have strong and effective bankruptcy laws in the country.
"Do we need a bankruptcy code? Absolutely! It is something I have been saying for six years in reports that we need a bankruptcy code," he said, while addressing an event last month.
“We need a bankruptcy code. We need equity to be seen as equity and debt to be seen as debt. Today there’s a lot of confusion... We need that confusion to be changed,” Rajan said.
According to media reports, the finance ministry formed a committee last month headed by former law secretary T K Viswanathan and comprising members from the departments of economic affairs and financial services, the ministries of law, corporate affairs, and micro, small and medium enterprises, RBI and the Securities and Exchange Board of India (Sebi).
The main objective of setting up the committee is to create a separate set of laws to streamline and update the existing regulations that deal with bankruptcy, although a final decision will be taken only after the terms of reference are finalized by the department of economic affairs towards the end of this month.
In his budget speech on 10 July, finance minister Arun Jaitley said "Government will work out effective means for revival of other stressed assets,"
Further, the finance ministry is working on improving debt recovery laws such as the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, so as to give more powers to lenders in dealing with defaults.
The committee constituted would suggest amendments in Sarfaesi Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act) and RDDB Act (Recovery of Debts Due to Banks and Financial Institutions).
Jaitley had also announced the setting up of six new Debt Recovery Tribunals at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri and Hyderabad.
There are over 40,000 cases worth Rs 1.73 lakh crore pending before various courts and Debt Recovery Tribunals. In March 2014, the Gross non-performing assets (GNPAs) in banking system had gone up 4.4 per cent from 3.8 per cent of the total assets in the previous fiscal. (KNN/SD)
The legislation is likely to be introduced by the time of the presentation of the next Union Budget in February, according to a media report.
Entrepreneurs as well as regulators have sought a better bankruptcy system in the country so that investors are able to recover their money at the earliest.
Recently, RBI Governor Raghuram Rajan had said that, there is a pressing need to have strong and effective bankruptcy laws in the country.
"Do we need a bankruptcy code? Absolutely! It is something I have been saying for six years in reports that we need a bankruptcy code," he said, while addressing an event last month.
“We need a bankruptcy code. We need equity to be seen as equity and debt to be seen as debt. Today there’s a lot of confusion... We need that confusion to be changed,” Rajan said.
According to media reports, the finance ministry formed a committee last month headed by former law secretary T K Viswanathan and comprising members from the departments of economic affairs and financial services, the ministries of law, corporate affairs, and micro, small and medium enterprises, RBI and the Securities and Exchange Board of India (Sebi).
The main objective of setting up the committee is to create a separate set of laws to streamline and update the existing regulations that deal with bankruptcy, although a final decision will be taken only after the terms of reference are finalized by the department of economic affairs towards the end of this month.
In his budget speech on 10 July, finance minister Arun Jaitley said "Government will work out effective means for revival of other stressed assets,"
Further, the finance ministry is working on improving debt recovery laws such as the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, so as to give more powers to lenders in dealing with defaults.
The committee constituted would suggest amendments in Sarfaesi Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act) and RDDB Act (Recovery of Debts Due to Banks and Financial Institutions).
Jaitley had also announced the setting up of six new Debt Recovery Tribunals at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri and Hyderabad.
There are over 40,000 cases worth Rs 1.73 lakh crore pending before various courts and Debt Recovery Tribunals. In March 2014, the Gross non-performing assets (GNPAs) in banking system had gone up 4.4 per cent from 3.8 per cent of the total assets in the previous fiscal. (KNN/SD)
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