The Union Cabinet on Wednesday approved the proposal to make amendments in the Insolvency & Bankruptcy Code 2016, through the Insolvency & Bankruptcy Code (Second Amendment) Bill, 2019. This also includes a provision to ring-fence successful resolution applicants from criminal proceedings with regard to offences committed by previous promoters of a company.
“The amendments aim to remove certain difficulties being faced during insolvency resolution process to realise the objects of the code & to further ease doing of business,” the govt said in a release.
The amendments aim to remove bottlenecks, streamline the corporate insolvency resolution process, & protect the last mile funding in order to boost investment in financially distressed sectors.
The amended Act would also ensure that the substratum of the business of a corporate debtor isn't lost. It can continue as a going concern by clarifying that the licences, permits, concessions, clearances etc. can't be terminated or suspended or not renewed during the moratorium period, the release said. In a separate decision, the Union Cabinet also approved the Aircraft (Amendment) Bill to enhance the safety & security of aircraft operations. The Bill enhances the maximum limit of fine from the existing ₹10 lakh to ₹1 crore. The Cabinet also approved the ‘Partial Credit Guarantee Scheme’ for the purchase of high-rated pooled assets from financially sound non-banking financial companies (NBFCs) & housing finance companies (HFCs) by public sector banks.
The amount of overall guarantee will be limited to the 1st loss of up to 10% of fair value of assets being purchased by the banks under the Scheme, or ₹10,000 crore, whichever is lower.
The window for one-time partial credit guarantee offered by the govt will remain open till June 30, 2020 or till such date by which ₹1,00,000 crore assets get purchased by the banks, whichever is earlier.
The scheme would cover non-banking financial companies (NBFCs)/housing finance companies (HFCs) that may have slipped into SMA-0 category during the one year period prior to Aug 1, 2018, & asset pools rated “BBB+” or higher.
SMA-0 accounts are the special mention accounts (SMA) against which the principal or interest or any other amount wholly or partially is overdue between 1-30 days
Equity support for IIFCL
The Union Cabinet also approved the proposal for providing additional equity support to India Infrastructure Finance Company Limited to the tune of ₹5,300 crore in financial year 2019-20 & ₹10,000 crore in financial year 2020-21.
“This will be done through regular budgetary support &/or through issue of recapitalisation bonds,” the Centre said.
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