BackInsolvency and bankruptcy code won’t replace SDR and S4A: Sudarshan Sen
The new regulation will empower all lenders to take action even before the problem manifests, says RBI executive director Sudarshan Sen
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Bad loan resolution schemes like Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A) will continue despite the implementation of the new Insolvency and Bankruptcy Regulation Code, 2016.
Speaking at the Mint conference on Bankruptcy Act—Impact of the new law on the banking landscape on 24 October, Sudarshan Sen, executive director of Reserve Bank of India, clarified that the new regulation will be another tool for banks to resolve stressed assets.
Sen said lenders will no longer have to wait for accounts to turn bad. The new regulation will empower all lenders to take action even before the problem manifests.
Under the insolvency regulation, a default will be resolved within 270 days of registration of a bankruptcy application.
However, he expressed doubts about whether banks would come forward to invoke the insolvency process as it would attract higher provisions.
Sen added that information utilities formed under the new regulation should perform the role of aggregators.
“There are already a number of primary gatherers of information like the credit information bureaus. If we take these bureaus as information utilities, we must remember these were created to meet certain specific objectives which are laid down in law. We must not lose sight of those objectives while at the same time leveraging what they have to subserve the information utilities in future," he said.
However, Sen said even as India has the best of schemes, there are not enough people to implement them.
According to him, quality, quantity and certification will be the bedrock on which the success or failure of this ‘grand leap forward’is going to depend.
He also said there is a need to make sure the transition to the new insolvency regulation system is smooth as all cases should not be transferred to the National Company Law Tribunal (NCLT) from day one.
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