Promoters who have defaulted on repayment of loans to banks, have been prompted to settle their dues of around £8.3 billion over fear of action being initiated under the newly-enacted Insolvency and Bankruptcy Code (IBC). Data compiled by the Ministry of Corporate Affairs (MCA) showed that over 2,100 companies have cleared their outstanding amounts, a majority of which came after the government amended the IBC to explicitly bar promoters of companies that were classified as a non-performing assets (NPAs) from bidding for these companies where the National Company Law Tribunal, the bankruptcy court, initiated action.
A loan is classified as an NPA if dues are unpaid for 90 days. The move had faced severe flak from the corporate sector as top names in the industry such as Ruias of Essar, Singals of Bhushan Group and Gaurs of Jaiprakash Group were locked out of the resolution process and there were fears that the bids may not be aggressive, resulting in the lenders having to recover only a small part of the loans. A source said, “The real success is the pressure on loan defaulters to clear dues. The borrowing and lending culture is changing because of IBC.”
