Con­cerned about stress in fi­nan­cial sec­tor, govt to bring NBFCs un­der in­sol­vency code

The Times of India (New Delhi edition) - - Front Page - NEWS NET­WORK

New Delhi: The gov­ern­ment is set to bring non-bank­ing fi­nance com­pa­nies within the am­bit of the In­sol­vency and Bank­ruptcy Code, but in a slightly tweaked form, to fire­wall the rest of the fi­nan­cial sys­tem from any pos­si­ble ad­verse im­pact.

The move comes at a time when many NBFCs are un­der stress and is based on the gov­ern­ment’s ex­pe­ri­ence with IL&FS, where it had to step in and ap­point a new board af­ter su­per­sed­ing the di­rec­tors. A year later, res­o­lu­tion has been slow and the gov­ern­ment has been forced to step in to en­sure smooth res­o­lu­tion of as­sets to en­sure that banks and fi­nance com­pa­nies with an ex­po­sure to IL&FS group are not hit.

But un­like other com­pa­nies, where a res­o­lu­tion pro­fes­sional is ap­pointed by the Na­tional Com­pany Law Tri­bunal, the min­istry of cor­po­rate af­fairs and the depart­ment of eco­nomic af­fairs in the fi­nance min­istry are work­ing out an ar­range­ment that draws from the Fi­nan­cial Res­o­lu­tion and De­posit In­sur­ance Bill, which was with­drawn. The bill had pro­vided for set­ting up a Res­o­lu­tion Cor­po­ra­tion that would take over the man­age­ment of the fi­nance com­pany once it was clas­si­fied as “crit­i­cal”.

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