Sunteți pe pagina 1din 2

Impact on Business

The Indian Bankruptcy Code from 2016 is one of the most beneficial economic reforms for the
country in terms of implementing changes to the Indian judicial system. The distinguishing
factor about the Indian Bankruptcy Code is that it works in a time-bound and time-sensitive
manner. The end result of this is that it becomes economically viable to implement Indian
Bankruptcy Code for corporates. Even the introduction of Indian Bankruptcy Code was done
in a speedy manner in terms of how the policy was rolled out and consequently implemented
in the Indian context post 2016. The expectations from Indian Bankruptcy Code post its success
has been to preserve the interests of the creditors, shape the accountability of those who
promote the said corporates and eventually speed up the national development. Development
is indirectly a function of the debt that the market is facing and if the insolvency and bankruptcy
is reduced in the economy, definitely it will prosper in terms of growth as a whole.
Among other cases, there have been many positive outcomes from the date that the Indian
Bankruptcy Code was implemented. Few cases to be discussed is the case of Vedanta buying
out Electrosteel thereby coming to the aid of a bankrupt company. Anil Agrwal guided the
company Vedanta Limited to buy out Electrosteel in order to get into the Steel making industry
in India by utilising the Indian Bankruptcy Code. The case of Vedanta is the second successful
resolution as undertaken by the new Indian Bankruptcy Code. National Company Law
Appellate Tribunal NCLAT approved the resolution offered by Vedanta as on the date of May
30, 2018. The transaction was completed by depositing a sum of Rs. 5,320 in the escrow
account of Electrosteel. Post the acquisition, Vedanta owned a stake of 90% in the Electrosteel.
Previously, Tata steel had bailed out Bhushan Steel by paying a sum of Rs. 36,400 crores which
was counted as the first breakthrough for success under the Indian Bankruptcy Code. These
two companies were under the radar by the Reserve Bank of India, who holds a list of toxic
corporate borrowers that it has labelled as the ‘dirty dozen’. Thus, buying out of Electrosteel
and Bhushan Steel contributes to a major success of Indian Bankruptcy Code as RBI tries to
save bankrupt companies. Another issue faced by RBI is that the total amount of debt in the
economy accounts for 1/4th of the total NPAs in the economy, which shall be further discussed.
Addressing the NPA issue in the Banking sector
The rising Non-Performing Asset in the economy is also a growing concern for major
stakeholders as well as the country on the broader perspective. Opposed to what we commonly
believe, the huge amount of Non-Performing Asset is not just present in the public sector banks
when we talk about the banking industry in India, the sum of amount in tie is higher when we
talk about the private sector banks. Statistics for the above data refutes our common belief. The
indirect and direct impact of the Non-Performing Asset is due to bad loans as committed by
these banks and the huge risk of capital erosion attached to it.
Higher the amount of Non-Performing Assets that a bank possesses, there is an observed
reduction in the lending power and capacity of the banks. India, as a developing nation, has a
major stake of its growth dependent on the amount of credit in the economy. Thus, economic
growth is directly hampered by rising Non-Performing Assets and it eventually acts as a
potential threat for the Indian economy as a whole.
The Indian Bankruptcy Code from 2016 has come to the relief of creditors awaiting their
compensation from transactions incurred. The insolvency regulators have set down rules that
have to be complied with that allows the creditors of the company to go after the guarantors of
the banks under turmoil so that the creditors can recover their dues. The Indian Bankruptcy
Code utilises the Information Utilities body in order to work the process in a time-bound and
efficient manner.

S-ar putea să vă placă și