Newly amended IBC Code law nudges to settle Rs 83,000 Cr bank dues; Read here to know how!

New Delhi, May 24: In a major breakthrough, the newly amended Insolvency and Bankruptcy Code law has given the perfect nudge for the system to explicitly bar promoters of companies that were classified as a non-performing asset (NPAs). 

The newly enacted IBC law has helped banks, who have defaulted on repayment of loans, to settle their dues of around Rs 83,000 Crores.

Data compiled by the Ministry of Corporate Affairs (MCA) showed that over 2,100 companies have cleared their outstanding amounts, a majority of which came after the government amended the IBC.

The newly amended Insolvency and Bankruptcy Code law seeks to bar the loan defaulters of certain companies that are classified as non-performing assets (NPAs). A loan is classified as an NPA if dues are unpaid for 90 days.

The code has been approved by the cabinet on Wednesday and it will come into force once it is approved by President Ram Nath Kovind.

What actually is “Insolvency and Bankruptcy Code law”?

“Insolvency and Bankruptcy Code law” aims to merge and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

The IBC code offers a uniform, comprehensive insolvency legislation encompassing all companies, partnerships and individuals (other than financial firms). The Insolvency and Bankruptcy Code 2016 was introduced in the Lok Sabha by Finance Minister Arun Jaitley in December 2015

The Insolvency and Bankruptcy Code seeks to create a unified framework to resolve insolvency and bankruptcy in India. The Code covers insolvency, liquidation, voluntary liquidation and bankruptcy.

Insolvency and Bankruptcy Code is a systematic and comprehensive reform, the benefits of which are manifold:

1. To help India increase its Ease of doing business quotient.
2. To help the country become one of the world’s best insolvency regimes.
3. To help in the development of bond markets which are the source of finance to many future infrastructure development projects.
4. To encourage innovation and entrepreneurship due to the ease of doing business.
5. To make India a favourable destination for investment, thereby giving a boost to the FDI inflow.
6. Since it is a single legislation, there would be a greater clarity in the application of coherent and clear provisions to various stakeholders.
7. Majorly aims to reduce the increasing Non-Performing Assets (NPAs) plaguing the banks’ Balance Sheets.
8. It would enable a better flow of capital in the economy.
9. The law would ensure easy and hassle-free exit of sick companies.

Here is the in-depth version of “Insolvency and Bankruptcy Code law.”