Provisioning Under Insolvency & Bankruptcy Code

BE/RBI/36/2017

A Reserve Bank report through its Deputy Governor says that Insolvency and Bankruptcy Code, would only help in cleaning up the Banks’ Balance Sheet in the coming days.  Thus, it was clarified that the IBC was not high as was being discussed.  Further the report adds:

  • A provision of 50 per cent cover be provided on cases referred to NCLT (National Company Law Tribunal) for insolvency proceedings, was suggested since, in terms of S4A the expected sustainability (recovery in other terms) in these cases, was only 50 per cent.
  • Also it reveals that a strong insolvency code, would improve the long term credit quality of banks and thus ensure the banks being placed on a strong footing.
  • An improper restructuring would end up in an increased problem for the banks.
  • Also it was felt that linking of bank lending rates to a market bench mark would bring out more clarity in the system.
  • Issues related to marginal cost of fund based lending rate, was also referred and a need for an external bench mark was suggested for deciding the interest rates. This suggested, that interest rates should not be linked to any bank specific issue and the ultimate rate will depend on the overall market competition prevailing.
  • Also it is learnt that RBI is working on a policy to regulate cryptocurrency or virtual money which is used as a medium of currency.

 

Author: Admin Bankedge

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