NCLT Current Affairs - 2019

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 Induslnd Bank- BFIL merger to be effective from July

The merger of Induslnd Bank and Bharat Financial Inclusion Ltd (BFIL) will be effective from 4 July 2019. This decision to file National Company Law Tribunal (NCLT) Order on 4 July, by lender IndusInd , BFIL and IFIL with Registrar of Companies was taken by the boards of IndusInd and BFIL.

Key Highlights

Background: In October 2018, IndusInd Bank decided to acquire India’s leading micro-finance player BFIL, earlier known as SKS Microfinance. On 10 June 2019, National Company Law Tribunal (NCLT), a quasi-judicial body in India that adjudicates issues relating to Indian companies, sanctioned Scheme of Arrangement among BFIL, IndusInd and IFIL and their respective shareholders and creditors.

Key Changes:

After the merger current CEO of BFIL, M R Rao, will become the CEO of IndusInd Financial Inclusion Ltd (IFIL) and all employees of BFIL will become part of Induslnd family.

The Business Correspondent (BCs) network of BFIL will operate under IFIL.

All Assets and liabilities of BFIL will be merged with IndusInd’s balance sheet.

The consolidated financial results for 1st quarter of FY19 will be published on 12 July 2019.

In accordance with Scheme of Arrangement, BFIL’s shareholders will get 639 shares of bank for every 1,000 they held. The scheme also contemplates a preferential allotment of share warrants to promoters of bank in accordance with scheme, which says that each share warrant, upon exercise, shall entitle Promoters to one Equity share.

Importance:

Financial Inclusion: This merger of IndusInd Bank Limited and BFIL will enable 8.8 million microfinance customers of BFIL to access savings, deposits and other banking products. Thus the merger will help in boosting financial inclusion in its truest form.

Increase Banking Reach: Also talent, capabilities and distribution of BFIL will enable IndusInd Bank to play a more meaningful role in rural India and will fulfill ambition of building financial inclusiveness and sustainability in large swathes of unbanked and underbanked India.

Month: Categories: Business, Economy & Banking

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Two years of insolvency and Bankruptcy Code (IBC)

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.

Month: Categories: Business, Economy & Banking

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