Finance Minister Arun Jaitley on Saturday assured debt-laden companies that the objective of the new insolvency law is not to banish them but to save them while ensuring that ‘debts are serviced’.
“The old regime by which the creditor would get tired of chasing the debtor and end up recovering nothing is over now. If a debtor has to survive, he will have to service his debt. Or, he will have to make way for somebody else,” he said, exhorting borrowers to develop a credit culture. The new regulations are viewed by some as giving upper hand to lenders who are reeling under Rs 8 lakh crore of non- performing assets (NPAs) or bad loans. PSU banks alone account for about 75 per cent of the total bad loans.
“The ultimate objective really is not liquidation of assets, (but) to save these businesses, get either the existing promoters with or without new partners or new entrepreneurs to come in and make sure that these valuable assets are preserved,” Jaitley said. Addressing a CCI-summit on insolvency and bankruptcy here on Saturday, he said the law now sides more with the lenders, as the slew of changes in the existing laws is aimed at speeding up the NPA resolution.
“It's not just one law we've changed. We’ve changed the DRTs (debt recovery tribunals) procedures, we’ve changed the provisions of Sarfaesi Act by providing a liberalised regime for ARCs.
The cumulative effect of all these laws is that the message in the legislation is loud and clear: the debtors will certainly have to make sure that their debts are serviced,” Jaitley said. “And if you don't, there is an effective alternative mechanism by which you exit or you take in a partner and or an alternative mechanism by which the business can be saved,” he added.