New Delhi, Feb 29 (IANS) Declaring financial sector reforms as being one of the "nine pillars" of Budget 2016-17, Finance Minister Arun Jaitley on Monday said a comprehensive bankruptcy code will be enacted and legislation brought in to deal with illicit deposit taking schemes.
"A systemic vacuum exists with regard to bankruptcy situations in financial firms. A comprehensive Code on Resolution of Financial Firms will be introduced as a bill in parliament during 2016-17," Jaitley said while presenting next fiscal's budget in parliament.
"This Code will provide a specialised resolution mechanism to deal with bankruptcy situations in banks, insurance companies and financial sector entities. This Code, together with the Insolvency and Bankruptcy Code 2015, when enacted, will provide a comprehensive resolution mechanism for our economy," he added.
The Insolvency and Bankruptcy Bill, 2015, proposes to enact a single bankruptcy code and set deadlines for processing insolvency cases.
The proposed law aims to reduce delays in resolution of insolvency cases and improve recoveries of amount lent to companies. The draft bill has proposed a timeline of 180 days, extendable by another 90 days, to resolve cases of bankruptcy.
A major proposal in the budget to tackle the problem of stressed assets in the banking sector concerns the Asset Reconstruction Companies (ARCs).
Jaitley on Friday proposed "to make necessary amendments in the SARFAESI Act 2002, to enable the sponsor of an ARC to hold up to 10 percent stake in the ARC and permit non-instituional investors to invest in Securitsation Receipts."
Besides, announcing that the Reserve Bank of India (RBI) would facilitate retail participation in government securities, he also said state-run general insurance companies would now be listed in the stock exchanges.
Continuing government efforts to deal with the high levels of non-performing assets (NPAs), or bad debts, of state-run banks, Jaitley also allocated Rs.25,000 crore towards their recapitalisation in the next fiscal.
Jaitley plans to provide Rs.25,000 crore capital each in the current and next fiscal years, while Rs.20,000 crore would be provided during 2017-18 and 2018-19.
In July last, the government had presented to parliament a supplementary demand for grants to provide for Rs.12,000 crore towards recapitalisation of public sector banks (PSBs).
The Rs.25,000 crore this year is being provided through three tranches.
The finance minister also announced that the government proposes reduction of its equity in IDBI Bank to below 50 percent.
"The process of transformation of IDBI Bank has already started. Government will take it forward and also consider the option of reducing its stake to below 50 percent," Jaitley told parliament.
