Insolvency and Bankruptcy Code (IBC)
Context:
- Comparing outstanding loan amounts with the value realised may not be a ‘reasonable indicator’ to assess the bankruptcy law’s effectiveness, said Reserve Bank Deputy Governor M. Rajeshwar Rao, while seeking to address concerns over deep haircuts that banks had taken in some of the insolvency resolutions plans.
About IBC:
- India’s bankruptcy law, the Insolvency and Bankruptcy Code, 2016 (IBC), intends to consolidate the existing framework by adopting a single insolvency and bankruptcy law.
- It establishes clearer and faster insolvency procedures to assist creditors, such as banks, in recovering debts and avoiding bad loans, which are a major drag on the economy.
- When a debtor defaults on a payment, creditors seize ownership of the debtor’s assets and have 180 days to settle the insolvency.
- To ensure that the resolution process runs smoothly, the Code grants debtors immunity from creditors’ resolution claims during this time.
- The Code also brings together provisions from existing legislation to create a single venue for debtors and creditors of all types to address insolvency.
Source: THE HINDU.
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