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Debtors can't be allowed to paralyse banking system, says Arun Jaitley

Mostly, companies themselves have filed petitions to restructure themselves

Veena Mani  |  New Delhi 

Finance Minister Arun Jaitley
Finance Minister Arun Jaitley

Minister on Thursday said needed the in order to be able to take decisions without fear of being subjected to investigation later.

Replying to a debate on amendments to the Banking Regulations Act, Jaitley, who also holds the defence and corporate affairs portfolios, said the decision to take defaulters through the bankruptcy process was not a political one, and that such a move was necessary to start clearing the Rs 7 lakh crore toxic assets in the

The amendments were passed by Lok Sabha and the Bill will now move to the Upper House of Parliament.

The Insolvency and Bankruptcy Code (IBC) allows creditors to file insolvency cases against defaulters, which are given 180 days for restructuring. 

The National Company Law Tribunal (NCLT) can offer a company an extension of 90 days but if a resolution plan is not finalised by then, its assets will be liquidated. All financial creditors will receive their shares first and then claims of operational creditors will be settled.

Jaitley said the reason why did not take their biggest defaulters through the insolvency process before the ordinance was issued was fear among bankers of being probed later under the Prevention of Corruption Act. A Reserve Bank of India (RBI) oversight committee was keeping an eye on the recovery process, he added.

In the last few months, few have filed insolvency petitions. 

Mostly, companies themselves have filed petitions to restructure themselves. 

The other category of petitioners are operational creditors, like service providers, flat owners and employees, who would have otherwise not have had the chance to claim their dues from defaulting companies.

Till July 10, 112 such announcements have been made, of which account for 17 announcements. State Bank of India (SBI) and Punjab National Bank (PNB) are applicants in three cases each, and Bank of India (BoI), IDBI Bank and ICICI Bank account for two cases each. Edelweiss Asset Reconstruction has initiated three cases. 

“A debtor cannot paralyse the by not paying up debts for years. At the same time, we need to ensure these companies are saved as running companies mean jobs,” Jaitley said. 

First Published: Thu, August 03 2017. 22:52 IST