In a bid to facilitate a time-bound and cost-effective resolution under the Insolvency and Bankruptcy Code, National E-Governance Services Ltd (NeSL), India’s first Information Utility (IU) registered under the IBC, has been set up to serve as a repository of financial information pertaining to any debt/claim. With 49 banks and 81 NBFCs having signed up already and 34 and 60 of them, respectively, uploading data, 73 per cent of loans to corporates by value is under NeSL, says S Ramann, Managing Director and CEO, NeSL. Excerpts:
What is the role of information utilities in the IBC?
The IBC intends the information utility to be that authentic source for data, which will enable faster admission of cases for insolvency under the NCLT. It will allow creditors to submit financial information, which is authenticated and verified and later accessed by various parties, such as creditors and the adjudicating authority. The intent is for a third-party or a custodian to secure proof of borrower, debt, default and secured assets to smoothen the insolvency process.
What sort of financial information is recorded?
Financial information ideally means records of debt, underlying assets as well as default, if any, by the borrower. The regulations have also looked at the ability of the IU to take data from other repositories of data. We are already in discussion with CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest) to pick asset details from them and we are trying to do the same with MCA21 because corporates anyway have to give their assets under their charge to the MCA.
So, as a creditor you are allowed to see the debt report with the consent of the debtor. In fact, you can see all the roles of the debtor like a ‘guarantor’ or ‘co-obligor’ for a loan.
Even default information should be uploaded. How is ‘default’ defined?
Default under IBC is one day default due to inability to pay what is due. The banks may not want to commence legal proceedings at every default but they need to report a default. We have written to all banks asking them to file default with the IU for cases admitted under the NCLT so that the process of verification with other parties is done with.
So, are bankers liable for whatever information they give?
Digital signature vouches the source of the data. The content of the document is still open to legal interpretation as to whether the content is also completely verified.
The Supreme Court judgment in Swiss Robbins states that data with the IU are prima facie evidence. Therefore, banks have taken a serious view and they have put in information which they have checked, putting their digital signature. It then goes to the borrower who also needs to verify; they can also raise disputes. It is better to raise disputes upfront than wait for three or five years.
I also think cost will come down in the banking system when the information of the IU is seen as completely agreed upon by both parties. Already the National Financial Reporting Authority (NFRA) has issued directions to the Chartered Accountant’s Institute to make amendments to the auditing standards whereby information filed by a creditor will be used by an auditor as an ‘external source of confirmation’.
Are there any timelines for banks to register?
The RBI itself didn’t set any timeline; so the banks are taking their time to do this, after following due internal process. Out of 21 PSU banks, 19 have already completed the process; and in private sector all the large ones have already filed the data. We have a few cooperative banks that have filed the data and a very few foreign banks have come forward. I think, the intent of every bank is to file the data. In fact, for the first time banks have been told to authenticate their data and then file it. Banks are cautious to authenticate the data.
And what should banks do to authenticate the data?
This law is about electronic evidence. The financial information needs to be verified and authenticated by parties connected to the debt by affixing their digital signature.
NeSL enables any creditor to access data real time and to understand the debt profile of the borrower.
It, therefore, has not only my loans from banks but also the issuances of bonds and debentures, any other credit note, my public deposits, money received through inter-corporate deposits from other corporates, etc.
Hence, even mutual funds can file information. Even HNIs as lenders can register and file information under the IU.
Can operational creditors too file information?
This is voluntary. Companies can protect their receivables. If they have raised invoices, they can file them and ask the debtor to accept it so it becomes a negotiable instrument.
In fact, banks are now saying they want to see the accepted invoices which become a stream of assured receivables.
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