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8Th Aug 2016
Moody's
said on Monday the Enforcement of Security Interest and Recovery of
Debts Laws and Miscellaneous Provisions Bill, 2016, and the
Insolvency and Bankruptcy Code, 2016 (bankruptcy), will lead to
structural improvements in banks dealing with bad assets.The Total
Investment & Insurance Solutions
While
the bankruptcy law has been enacted, the Enforcement of Security
Interest and Recovery of Debts Bankruptcy Code, 2016, has to be
passed by the Rajya Sabha after it was cleared by the Lok Sabha.
The
Enforcement of Security Interest and Recovery of Debts Bankruptcy
Code, 2016, is a credit positive for the Indian banks as it aims to
expedite the recovery and resolution of bad debts, said a statement
issued by Moody's Investors Services.The Total Investment &
Insurance Solutions
"Weakness
in current processes for bad debt resolution has been a key
structural credit challenge for Indian banks. There are currently
about 70,000 cases pending in debts recovery tribunals (DRTs), and
these cases have been pending for many years owing to various
adjournments and prolonged hearings," Moody's said.
According
to Moody's, the provisions relating to promotion of asset
reconstruction companies for banks to off-load their non-performing
assets (NPA) and prioritise debt due to secured creditors over all
other debts and claims (including government claims) are credit
positive features for the Indian banks.The Total Investment &
Insurance Solutions
The
Enforcement of Security Interest and Recovery of Debts Bankruptcy
Code, 2016, proposed electronic filing of all proceedings, time limit
for filing appeals against decisions of Debt Recovery Tribunals
(DRTs) reduced to 30 days from 45 and debtors to deposit 50 per cent
of the amount of debt payable before filing an appeal are positive
for Indian banks, said the credit rating agency.The Total
Investment & Insurance Solutions
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