Centre approves ordinance to amend insolvency code

The Centre has approved an ordinance to amend the Insolvency and Bankruptcy Code (IBC), providing a relief to home buyers.

The amendments will protect the interest of home buyers by treating them as financial creditors which will make it easier for them to recover their investments.

They are also expected to give a fillip to the Micro, Small and Medium Enterprises (MSME) sector by giving them a special dispensation in the insolvency process.

Exemption from various provisions in the resolution process will help them turnaround faster keeping in mind their smaller scale and importance to the Indian economy.

The recalibration of the voting threshold will help in promoting resolution over liquidation and streamlining of provisions for eligibility to submit a resolution plan will improve the markets for Non-Performing Assets (NPAs). Other changes will improve the efficiency of the insolvency resolution and liquidation framework.

The NPA resolution process has already seen major success. The recent resolution of one of the largest NPAs, Bhushan Steel to Tata Steel under this Code has already helped banks and other lenders recover Rs 36,400 crore in cash and further 12 percent equity stake in the company. With these amendments, this process is expected to become even more streamlined and ultimately help banks, an important pillar of the economy, to recover NPAs and help the economy move towards faster growth.