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Insolvency Code for NBFCs
Why is it in the news?
- According to Moody's, the government’s recent move to amend the Insolvency and Bankruptcy Code(IBC) to enable resolution of non-banking finance companies (NBFCs) is a credit positive for Indian banks.
More in the news
- Until now, the only resolution of NBFCs was liquidation.
- Government recently amended the IBC for Inclusion of the NBFCs in the country’s bankruptcy code.
- Recently RBI superseded the board of DHFL- a NBFC. This is a first time RBI superseding the board of a NBFC.
- Also RBI planning to start insolvency proceeding against DHFL.
About IBC
- The Code offers a uniform and comprehensive insolvency legislation encompassing all companies, partnerships and individuals.
- It suggests two options:
(1) Restructuring if the firm is viable.
(2) Liquidation if the firm is not financially viable.
- Regulator under IBC: The Insolvency and Bankruptcy Board of India (IBBI).
- Time Limit:
(1) The new amendments to IBC fixes the deadline for resolution to 330 days.
(2) However, as per recent Supreme Court verdict, the deadline of 330 days is not sacrosanct, as Supreme Court has asked to extend the deadline for resolution.
- Adjudicating Authority:
(1) National Company Law Tribunal (NCLT): For Corporate and Limited Liability Partnerships.
(2) National Company Law Appellate Tribunal (NCLAT) will be Appellate Authority.
(3) Debt Recovery Tribunal (DRT): For Individuals and Unlimited Partnership Firms.
Source
The Hindu.