India passes Bill to revamp bankruptcy laws in major reform

NEW DELHI • India has overhauled its archaic bankruptcy laws in a key reform that will make it easier to wind down companies and help banks to recover bad loans.

The long-awaited Bill that cleared the Parliament's Upper House late on Wednesday replaces a patchwork of legislation with a single law and lays down a host of new rules.

The Insolvency and Bankruptcy Code 2016 sets out a 180-day deadline to resolve bankruptcy cases - currently it takes 4.3 years on average, World Bank data shows, among the longest in the world.

Individuals caught hiding assets or defrauding lenders during the insolvency process can be punished with up to five years in prison or a hefty fine. Bankrupt individuals would be barred from contesting elections as well.

"Today is a historical day for economic reforms in India," the Finance Ministry said in a statement.

The opposition swung behind the measures to help banks recover more than US$120 billion (S$164 billion) in troubled loans.

Prime Minister Narendra Modi, who completes two years in office this month, had promised to introduce the code.

India's efforts to clip the wings of high-profile debtors suffered a setback in March when tycoon Vijay Mallya flew to London as bankers pressed him to repay about US$1.4 billion owed by his defunct Kingfisher Airlines.

At present, more than 70,000 liquidation cases are pending in debt recovery tribunals and courts.

Mr Nikhil Shah, managing director of consulting firm Alvarez & Marsal in India, said the law could unlock billions of dollars but would not be easy to implement because of India's cumbersome legal system.

AGENCE FRANCE-PRESSE, REUTERS

A version of this article appeared in the print edition of The Straits Times on May 13, 2016, with the headline 'India passes Bill to revamp bankruptcy laws in major reform'. Print Edition | Subscribe