India Mulls NBFC Debt Resolution Under Insolvency Law

India is considering setting up a special window under the Insolvency and Bankruptcy Code for the resolution of stressed non-bank lenders.

The government is closely considering the proposal of a framework to deal with financial services providers that require resolution in the absence of Financial Resolution and Deposit Insurance Bill, an official told reporters. But it’s yet to finalise the bill that sought to resolve the stressed financial institutions.

The official said the government is also working out a mechanism where the resolution applicant, who acquires a stressed company as a going concern under the IBC, won’t face criminal liability of the previous company management. Besides, it’s mulling a proposal in which properties or assets of companies under resolution won’t be attached by investigation agencies, the official said.

This comes after the Enforcement Directorate attached properties of Bhushan Power & Steel Ltd., alleging siphoning of funds by its erstwhile promoters. JSW Steel Ltd., which has emerged as the successful bidder for Bhushan Power with its bid of Rs 19,700 crore, filed an appeal against the investigative agency’s move before the National Company Law Appellate Tribunal. While the tribunal directed the Enforcement Directorate to release the attached properties, it stayed transfer of the payment by JSW Steel to the creditors of Bhushan Power until investigation into the allegations is completed.