Taking a key reform measure to improve ease of doing business, a parliamentary panel in India approved a bill to update outdated bankruptcy regulations. The panel proposed that the Insolvency and Bankruptcy Code should include laws to seize overseas assets of defaulting companies and individuals. The legislation, which will make it easier to wind up a dying company or recover dues from a defaulter, could be passed in the current session of parliament that ends on May 13, Finance Minister Arun Jaitley said.
World Bank data shows that creditors in India recover about 25.7 cents on the dollar in the 4.3 years it takes to resolve insolvency compared with 80.4 cents in the U.S. in less than half that time, which deters lending and investment, reports Bloomberg. The panel has also suggested that apart from banks, the state- owned Life Insurance Corporation and Infrastructure Development Finance Company be included in the list of lenders.
The legislation proposes:
- an insolvency regulator
- procedures for early identification of financial distress in companies, and
- time-lines for their revival or shutting down
Insolvency issues are to be dealt with in a time frame of 3 to 9 months.
Among other measures to recover bad loans, India is planning to change rules, allowing debt recovery tribunals to limit cases to two hearings and give a ruling within 30 days of the final hearing.