{"id":74154,"date":"2020-12-24T10:53:04","date_gmt":"2020-12-24T05:23:04","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=74154"},"modified":"2020-12-24T11:25:59","modified_gmt":"2020-12-24T05:55:59","slug":"impacts-of-suspension-of-insolvency-and-bankruptcy-code","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/impacts-of-suspension-of-insolvency-and-bankruptcy-code\/","title":{"rendered":"Impacts of suspension of Insolvency and Bankruptcy Code"},"content":{"rendered":"<p><b><span data-contrast=\"auto\">Context:\u00a0<\/span><\/b><span data-contrast=\"auto\">The government has decided to keep the critical provisions of the Insolvency and Bankruptcy Code (IBC) of 2016 in a state of suspension till March 31, 2021.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">What is the ordinance?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\u25aa\" data-font=\"Noto Sans Symbols\" data-listid=\"2\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"none\">The government had raised the threshold of loan defaults that would spark off IBC proceedings from \u20b91 lakh to \u20b91 crore on the day of the lockdown\u2019s announcement.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:720,&quot;335559737&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"\u25aa\" data-font=\"Noto Sans Symbols\" data-listid=\"2\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"none\">An order, in June, indefinitely barred the beginning of insolvency proceedings(IBC) for defaults arising on or after March 25, 2020, for a period of six months that could be stretched to a year. <\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:720,&quot;335559737&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><b><span data-contrast=\"auto\">What are the possible effects of such a move ?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\u25cf\" data-font=\"Arial\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">On recovery: <\/span><\/b>Since there is a relaxation in IBC, <span data-contrast=\"auto\">It could act as\u00a0an\u00a0hindrance to the government\u2019s proclamations of a V-shaped recovery.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:720,&quot;335559737&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\u25cf\" data-font=\"Arial\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"3\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">On sectors:\u00a0<\/span><\/b><span data-contrast=\"auto\">Businesses in the sectors, which are returning to the pre-COVID levels may not be required to be protected from exits if they are not competitive.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:720,&quot;335559737&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\u25cf\" data-font=\"Arial\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"4\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">On small and medium businesses:\u00a0<\/span><\/b><span data-contrast=\"auto\">If the government is concerned about small and medium businesses, it could squeeze the default threshold limit a bit higher, while letting bankruptcy processes function again for larger loan accounts.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559685&quot;:720,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"\u25cf\" data-font=\"Arial\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">On banks:\u00a0<\/span><\/b><span data-contrast=\"auto\">A catch-all suspension may burden the banks further.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559685&quot;:720,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\u25cf\" data-font=\"Arial\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">On the industry:\u00a0<\/span><\/b><span data-contrast=\"auto\">Cutting off the ability of businesses to enter insolvency voluntarily may also act against the interests of the industry.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559685&quot;:720,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\u25cf\" data-font=\"Arial\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"3\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">On borrower and the lender:\u00a0<\/span><\/b><span data-contrast=\"auto\">In the absence of an exit-route, the assets of the firm would lose value. Thus, it would negatively affect the lender and the borrower.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559685&quot;:720,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><b><span data-contrast=\"auto\">What is the way forward?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\u25aa\" data-font=\"Noto Sans Symbols\" data-listid=\"2\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"none\">A more nuanced approach would have been better for banks, businesses and the economy. Delaying the unavoidable would mean greater financial stress ahead, as the restructuring and recovery of bad loans shall get slower and future growth momentum would be pricked at the cost of understating present systemic stress.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:720,&quot;335559737&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276,&quot;335559991&quot;:360}\">\u00a0<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Context:\u00a0The government has decided to keep the critical provisions of the Insolvency and Bankruptcy Code (IBC) of 2016 in a state of suspension till March 31, 2021.\u00a0 What is the ordinance?\u00a0 The government had raised the threshold of loan defaults that would spark off IBC proceedings from \u20b91 lakh to \u20b91 crore on the day&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/impacts-of-suspension-of-insolvency-and-bankruptcy-code\/\">Continue reading <span class=\"screen-reader-text\">Impacts of suspension of Insolvency and Bankruptcy Code<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":74155,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,1351,1310,9],"tags":[],"class_list":["post-74154","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-9-pm-daily-articles","category-daily-news","category-daily-news-updates","category-public","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2020\/12\/Impacts-of-suspension-of-Insolvency-and-Bankruptcy-Code.jpg?fit=1280%2C720&ssl=1","views":{"total":0,"cached_at":"","cached_date":1704894004},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/74154","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=74154"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/74154\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/74155"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=74154"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=74154"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=74154"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}