Recent legislative and regulatory measures to boost investor interest
In the recent past, India has embarked upon a number of legislative and regulatory measures that are certain to create a positive impact on the investment climate prevailing in the country and capable of boosting the confidence of investors.
Some key measures include:
Insolvency and Bankruptcy Code, 2016
The recent enactment of a comprehensive legislation relating to insolvency of corporates, firms and individuals has been a much awaited move.
The Insolvency and Bankruptcy Code, 2016 (IBC) lays down a resolution process that is time bound and undertaken by professionals.
It creates an institutional mechanism for insolvency resolution process for businesses operated by companies, individuals or any other entities, either by coming up with a viable survival mechanism or by ensuring their prompt liquidation.
Through this enactment, Parliament has codified the laws governing insolvency and bankruptcy of both corporates and individuals, which were spread over a number of legislations.
The Financial Resolution and Deposit Insurance Bill, 2016 (Draft)
The IBC 2016, does not provide for resolution of corporates providing financial services.
Recently, a draft Bill for this purpose has been recommended by a working group constituted by the Centre and it aims to establish a framework to carry out the resolution of certain categories of financial service providers in distress and to provide deposit insurance to consumers of certain categories of financial services.
The draft Bill not only consolidates the resolution provisions presently scattered in different statutes, but also introduces new requirements like classification of financial service providers into various categories of risk to viability, submission of resolution/restoration plans, etc. and new methods for resolution, on the lines of prevalent international practices.
The overall mechanism contemplated under the Bill would certainly bring in more clarity in terms of the rights of investors in the event of resolution of the investee financial service provider and is expected to improve investor confidence in the market.
SARFAESI Act and DRT Act
Slow pace of recovery of financial debts has been imposing considerable strain on the financial position of the lenders, thus raising concerns for any investor of such lenders.
Specialised laws establishing Debt Recovery Tribunals (DRTs) and empowering secured creditors to enforce security interest without the intervention of court, have been in vogue for several years now. While, such mechanisms have definitely facilitated faster recovery, much more needs to be done.
Some of the changes made with respect to the functioning of DRTs are:
Stricter time lines for filing of written statement, conclusion of hearings, etc. to expedite adjudication
Filing of recovery application, documents and written statements in electronic form
