BENGALURU : The Union government is planning a three-month extension for the suspension of fresh insolvency proceedings, a move that will bring much relief to corporate borrowers impacted by the pandemic-influenced economic slowdown.
This was announced by Union Finance Minister Nirmala Sitharaman on Monday, during her virtual address to members of the Bangalore Chamber of Industry and Commerce (BCIC). The finance minister, who also holds the corporate affairs portfolio, said the suspension of Insolvency and Bankruptcy Code (IBC) could be extended from December 25 up to March 31, 2021.
‘’So the entire year (from March 25, 2020 to March 31, 2021) the IBC is suspended, (and) rightfully so because every industry has gone through major stress because of the pandemic. And nobody could be drawn towards insolvency process which may have occurred during the pandemic,’’ she said.
The Centre had raised the minimum threshold to initiate solvency proceedings from Rs 1 lakh to Rs 1 crore to insulate micro, small and medium enterprises (MSMEs) from bankruptcy on defaulting on loans.
Sections 7, 9 and 10 of the IBC, which pertain to corporate insolvency resolution process by a financial creditor, operational creditor and corporate debtor, respectively, had been suspended to provide relief.
The ordinance to suspend fresh insolvency proceedings came into effect in March, when Prime Minister Narendra Modi announced the nationwide lockdown through an ordinance, and Parliament in September cleared the move to replace the ordinance, amending IBC with a bill.