The Finance Ministry is making all efforts to table the new bankruptcy law in the winter session of Parliament, Department of Economic Affairs Joint Secretary Manoj Joshi said today.
“Our attempt is to go into the winter session of Parliament, which is a bit tight because consultation would take time, but still the target is winter session perhaps.
“Otherwise, the Budget session certainly would be going to be the target,” Joshi said at a FICCI event here today.
He said the Bankruptcy Law Reform Committee (BLRC), headed by former Law Secretary T.K. Vishwanathan, is working on it and immediately after that the ministry will be able to go to Parliament for the enactment of the law and putting in place the system for it to work.
For the first time, a comprehensive law has been planned as earlier attempts were all bank-led in terms of bankruptcy, but this time it is very comprehensive, focused on creditors and company’s resolution, he said.
“We are putting a lot of focus on administrative mechanism by which bankruptcy enforcement could take place because in our context, if it gets delayed then bankruptcy does not take place. This is the highest priority for us because without which we would not be able to move much,” he said.
Beyond AAA rated bonds and quasi sovereigns if the corporate bond market has to grow, then the bankruptcy system has to be there, he said.
Joshi said the government is also looking at increasing pools of funds which could invest in the bond market.
“We have very few players like banks, LIC and other insurance companies, EPFO and other provident funds, National Pension Scheme (NPS, MF and FIIs).
“The investment horizon of mutual funds and FIIs is very short-term. They need liquidity so for them going beyond corporate sovereign is very difficult,” he said.
Joshi, however, said LIC and banks have demonstrated very good ability of going beyond the short-term horizon and both are lending and making investments in equity or corporate bonds with much longer horizon and much better evaluation of projects.
Players like PF, EPFO and NPS have focused mainly on something that is tested and is really working.
There is a need to make pension plan much more tax efficient compared to just a plan investment, he said.
“We need to work on ease with which people can put money in pension plan, which is not happening and a large number of youngsters earning well are not putting money in pension plans,” Joshi said.