IBC Re­boot: Re­lief For Home Buyers in Sight

The Economic Times - - Finance & Commodities -

ET NOW

The much-awaited IBC re­boot is fi­nally here. Af­ter a meet­ing of the Union Cabi­net, Law Min­is­ter Ravi Shankar Prasad said the gov­ern­ment has ap­proved some key changes to the In­sol­vency & Bank­ing Code, based on the rec­om­men­da­tions made by a 14-mem­ber panel headed by Cor­po­rate Af­fairs sec­re­tary In­jeti Srinivas.

Al­though the min­is­ter did not re­veal the specifics, re­ports sug­gest that the green light has been given to a pro­posal to treat home buyers as fi­nan­cial cred­i­tors, which will al­low them to par­tic­i­pate in in­sol­vency pro­ceed­ings.

An­other key change is the re­lax­ation in Clause 29(A) of the IBC, which bars de­fault­ing pro­mot­ers from bid­ding for their own as­sets. This clause was added to the IBC in Novem­ber last year to pre­vent the back­door en­try of will­ful de­fault­ers to win back their own as­sets at huge dis­counts, but in ef­fect it made life dif­fi­cult for mi­cro, small and medium en­ter­prises. Mr Prasad said the gov­ern­ment will now ef­fect the changes by pro­mul­gat­ing an or­di­nance, which will be sent to the Pres­i­dent for his fi­nal as­sent.

But will the muchawaited IBC re­boot help lenders get their money back from de­fault­ing com­pa­nies? Con­sid­er­ing the long le­gal tan­gles, will it re­ally pro­vide a buf­fer for home buyers? Also, will the new changes pro­vide a safety net for MSMEs that may have gone belly up for no fault of theirs. On ET NOW’s In­dia Devel­op­ment De­bate, bank­ing ex­perts and econ­o­mists dis­cussed the changes to the IBC. Here are some key take­aways:

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