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The Union Finance Minister Arun Jaitley has written a Facebook post titled ‘Two years of insolvency and Bankruptcy Code (IBC)”. In the post, he explains how things have been changed after the IBC was passed by the Parliament.
Once the IBC was passed by the government, the government took immediate steps to set up Insolvency and Bankruptcy Board of India and National Company Law Tribunal (NCLT).
Recovery of Debt
The Finance Minister states that the recovery under the IBC was satisfactory and highlights the ways under IBC through which the money was recovered:
- The section 29 A of IBC mandated that persons who have contributed to the defaults of the corporate debtor or are undesirable due to incapacities as specified in the section or are a ’related party’ to another defaulting party, are prevented from gaining control of the corporate debtor by being declared ineligible to submit a resolution plan under the Code.
- As a result, the companies are paying up in anticipation of not crossing the red line and being referred to NCLT.
- Many debtors are paying up once the creditor has filed the petition at a pre-admission stage so that the declaration of insolvency does not take place.
- NCLT has resolved some major cases & many are on the way of resolution.
There has been a definite improvement in the lending and borrowing behaviour, an increase in the conversion of NPAs into standard accounts and decline in new accounts are a testimony to this fact.
The Finance Minister notes that so far 1322 cases have been admitted by NCLT. 4452 cases have been disposed at the pre-admission stage and 66 have been resolved after adjudication. 260 cases have been ordered for liquidation. In 66 resolution cases, the realization by creditors was around Rs. 80,000 crores.
The Reserve Bank of India (RBI) has formed an expert committee to look into the various challenges being faced by MSMEs and suggest ways and measures to rejuvenate them.
Composition of the Committee
The eight-member committee would be chaired by former Securities and Exchange Board of India chairman UK Sinha. The other members of the committee are Ram Mohan Mishra, Pankaj Jain, PK Gupta, Anup Bagchi, Abhiman Das, Sharad Sharma, and Bindu Ananth.
Terms of Reference of the Committee
The Terms of Reference of the Committee include:
- Review the current institutional framework in place to support the MSME (micro, small and medium enterprises).
- Examine the factors affecting the timely and adequate availability of finance to the MSME sector.
- Study the impact of the recent economic reforms on the sector and identify the structural problems affecting its growth.
- Conduct a study about the best global practices with respect to MSMEs and recommend its adoption in India, wherever appropriate.
- Review the existing MSME focused policies and its impact on the sector.
- To propose measures for leveraging technology in accelerating the growth of the sector.
Significance of MSMEs for Indian Economy
The MSMEs are termed as engines of growth of India. MSMEs account for more than 80% of the total industrial enterprises in India creating more than 8000 value-added products and contribute about 8% to the GDP. About 45% of total manufacturing output and 40% of the total exports from the country are from MSMEs.