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Bankruptcy law to boost bond market, says RBI
Expecting the proposed enactment of bankruptcy law to be a “defining event”, RBI deputy governor H R Khan said the law would help develop corporate bond market in India. “Enactment of the Bankruptcy Act will be a defining event as regards the development of the corporate debt market,” he said at the 17th annual conference of FIMMDA-PDAI last week in London.
Expecting the proposed enactment of bankruptcy law to be a “defining event”, RBI deputy governor H R Khan said the law would help develop corporate bond market in India. “Enactment of the Bankruptcy Act will be a defining event as regards the development of the corporate debt market,” he said at the 17th annual conference of FIMMDA-PDAI last week in London.
The Insolvency and Bankruptcy Code 2015 is before Lok Sabha and is being examined by the joint committee of Parliament. It will replace the existing bankruptcy laws. The proposed law will cover individuals, firms, limited liability partnerships, partnership firms and recommends a time-bound framework – 180 days, extendable by another 90 days. Currently, it takes more than four years to resolve insolvency in India.
Besides, Khan said, some of the recommendations of the companies law committee, particularly relating to private placement of securities, could also have far reaching implications for easing the corporate bonds issuance process.
He further said based on recommendations of a working group set up under the aegis of sub-committee of financial stability and development council, certain measures have been announced in the Union Budget 2016-17 for development of the corporate bond market.
These include setting up of a dedicated fund to provide credit enhancement to infrastructure projects by LIC and issue of guidelines by RBI to encourage large borrowers to access a certain portion of their financing needs through market mechanism instead of the banks.
Besides, expansion of investment basket of FPIs to include unlisted debt securities and pass through securities issued by securitisation SPVs was also announced.
