New rules framed under IBC for rescue of non-bank lenders

The Government of India has issued fresh rules under the Insolvency and Bankruptcy Code (IBC) to govern the rescue of non-bank lenders. The new rules are likely to help out distressed shadow banks and housing financiers, which have been battling a liquidity crunch for a year. These entities will be covered by a special window under the bankruptcy code, which will be notified from time to time.

Reserve Bank of India has been given the authority to decide which companies will be taken up to a bankruptcy tribunal under these rules. The bankruptcy tribunal will appoint an administrator who will be nominated by the regulator, will try to stitch together a turnaround plan. In case a turnaround of the financial institution is not possible, the tribunal will gather the views of the regulator before deciding to liquidate it.