India’s parliament on Tuesday approved amendments to the Insolvency and Bankruptcy Code Bill to bar owners of defaulting firms from bidding to buy back assets when they are auctioned as part of bankruptcy proceedings.
The government had earlier passed an executive order aiming to “keep out such persons who have wilfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company.”
Replying to the debate in the upper house of parliament, Finance Minister Arun Jaitley said the proposed changes in rules were expected to help streamline the process of selecting buyers for stressed assets.
The aim was to exclude wilful defaulters from taking over the management of companies after banks had taken losses on loans.
Several opposition lawmakers expressed concern the new rules could reduce competition for stressed assets and result in lower recoveries for creditors.
In June, India’s central bank ordered 12 of the country’s biggest loan defaulters to be forced into bankruptcy courts as it tries to cut a record $147 billion of soured loans that have accumulated in the country’s banking sector.