India’s Parliamentary Panel Approves Overhauling Bankruptcy Regulations

Taking a key reform measure to improve ease of doing business, a parliamentary panel in India approved a bill to update outdated bankruptcy regulations.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.

Parliament of India

Parliament of India

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.

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Posted on by Gunjan Bagla
Gunjan Bagla
California-based management consultant Gunjan Bagla runs Amritt, a consulting firm helping American companies to succeed in India. Amritt is the trusted advisor for India market research, India business development, India market entry, Global Engineering, Global Technology Scouting, India R&D and Open Innovation. Gunjan is author of "Business in 21st Century India: How to Profit Today from Tomorrow’s Most Exciting Market" (Hachette Book Group, 2008), Amazon's top rated title on the subject. He has appeared as the India Expert on BBC Television, Bloomberg TV, Fox Cable Business and has been quoted in the New York Times, the Los Angeles Times, the Hollywood Reporter and Business Week for his expertise on India.

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