Skip to main content

Defaults are Costly: Bankruptcy Law Gives Lenders More Teeth

By
Lenders can bargain strongly on asset recovery, defaulting borrowers can lose control of co
With the Bankruptcy Act in place, banks can breathe easy, at least in the medium term, as corporate borrowers will now intensify their efforts to avoid loan defaults and the likely loss of management control of business, said Moody's Investors Service.
This will empower lenders to bargain strongly in matters of asset recovery, while borrowers can gain with lower borrowing costs after three-four quarters.
“The (defaulting) borrowers will lose control of the company as soon as the process is initiated,“ Srikanth Vadlamani, vicepresident, Financial Institutions Group, Moody's Investors Service, told ET from Singapore.“This, in itself, should act as a key incentive for them not to default in the first place.“
A few weeks ago, the government passed the Bankruptcy Bill, introducing a time-bound settlement process against loan default. With the Bankruptcy Act, the resolution process-from the date of filing cases to the final resolution--will take a maximum of 270 days, with three-fourth of the total lenders agreeing to drag a defaulting borrower to court. In India, it takes 4.3 years to resolve such cases, data from World Bank shows, compared with six months in Japan, eight months in Singapore and 1.5 years in the US.
The new bankruptcy code is credit positive for Indian banks because it will vastly increase their bargaining power vis-à-vis debtors in distressed asset resolutions, Moody's stated in the note.
Borrowers too can gain from it, subject to proper implementation mechanism, and if they are disciplined to repay dues.
“If properly done (implementation), it should definitely lead to a decline in credit cost over the medium term,“ Vadlamani said.
He, however, warned that the Bankruptcy Act is unlikely to be a banking panacea immediately, and everything may not be a cakewalk.
The Economic Times New Delhi, 27th May 2016

Comments

  1. John Barness6 June 2016 at 15:23

    In my experience, legislation processes organized by virtual data rooms are easier to conduct. I got one at virtual data room cost comparison and still have my work well done.

    ReplyDelete
  2. WUGI26 February 2019 at 19:20

    Having studied all online casinos realized that well best live casino the best of the best. my criterion is honesty online casinos

    ReplyDelete

Post a Comment

Popular posts from this blog

GST collection for November rises by 8.5% to Rs.1.82 trillion

By
  New Delhi: Driven by festive demand, the Goods and Services Tax (GST) collections for the Union and state governments climbed to Rs.1.82 trillion in November, marking an 8.5% year-on-year growth, according to official data released on Sunday. Sequentially, however, the latest collection figures are lower than the Rs.1.87 trillion reported in October, which was the second highest reported so far since the new indirect tax regime was introduced in 2017. The highest-ever GST collection of Rs.2.1 trillion was reported in April. The consumption tax figures highlight the positive impact of the recent festive season on goods purchases, providing a much-needed boost the industry had been anticipating. The uptick in GST collections driven by festive demand had been anticipated by policymakers, who remain optimistic about sustained growth in rural consumption and an improvement in urban demand. The Ministry of Finance, in its latest monthly economic review released last week, stated that I...
Post a Comment
Read more

Budget: Startup sector gets new Fund of Funds, FM to allocate Rs 10K cr

By
  The Indian startup sector received a boost with Finance Minister Nirmala Sitharaman announcing the establishment of a new fund of funds (FoF) in the Budget 2025. The minister unveiled a fresh FoF with an expanded scope, allocating Rs 10,000 crore. The initial fund of funds announced by the government with an investment of Rs 10,000 crore successfully catalysed commitments worth Rs 91,000 crore, the minister said.   “The renewal of the Rs 10,000 crore commitment to the Fund of Funds for alternative investment funds (AIFs) is a significant step forward for the Indian startup and investment ecosystem. The initial Rs 10,000 crore commitment catalysed Rs 91,000 crore in investments, and I fully expect this fresh infusion to attract an additional Rs 1 lakh to Rs 1.5 lakh crore in capital,” said Anirudh Damani, managing partner, Artha Venture Funds.   Damani further added that this initiative will provide much-needed growth capital to early-stage startups, further strengthenin...
Post a Comment
Read more

RBI to weigh growth slowdown, inflation at its MPC meeting this December

By
  Despite GDP growth declining to 5.4 per cent in the July–September quarter, the Reserve Bank of India’s (RBI) six-member monetary policy committee (MPC) is expected to maintain the current repo rate during its review meeting this week, according to a Business Standard survey of 10 respondents. Among the respondents, only IDFC First Bank forecast a 25-basis-point (bps) reduction in the repo rate. Since May 2022, the RBI has raised the repo rate by 250 bps to 6.5 per cent as of February 2023 and has held it steady across the last 10 policy reviews. The latest GDP figures, published on Friday (November 29), showed that growth for Q2 FY25 slowed to 5.4 per cent year-on-year, down from 6.7 per cent in Q1. Most survey participants suggested that the RBI might revise its growth and inflation projections for the financial year. The poll indicated that the central bank could lower its growth estimate from the current 7.2 per cent and increase its inflation forecast, currently at 4.5 per c...
1 comment
Read more