India's Insolvency and Bankruptcy Code is quite a positive reform for the financial sector, especially for state - run banks heavily burdened with stressed assets, as it will give creditors a legal path for recovering their dues in a time - bound way, Japanese financial services firm Nomura said in a report.
"India currently ranks 136 in the World Bank's resolving insolvency ranking; it takes 4. 3 years to resolve insolvency and the recovery rate (at 25. 7 cents to a dollar) is very low.
The Code will play a key role in improving the ease of doing business in India, " said a Nomura research note.
"Overall, the Code is a very positive financial sector reform, whose benefits will be visible in coming years.
It should make lenders more confident in lending and borrowers more accountable, " it said.
In view of the multiple laws dealing with insolvency in India which lead to delays, the Code will consolidate the existing framework and create a new institutional structure, Nomura added.
The report also said that if not in this session, the Code should be passed in the monsoon session of parliament that will follow a few months after the current Budget session ends on May 13.
"Its full implementation is expected to take time as the entire institutional structure needs to be established, " it said.
Following its passage in the Lok Sabha earlier this week, the bill will now go to the Rajya Sabha.
The Insolvency and Bankruptcy Bill, 2015 proposes to enact a single bankruptcy code and set deadlines for processing insolvency cases, thereby cutting down the time it takes to wind up a company or recover dues from a defaulter.
It has proposed a timeline of 180 days, extendable by 90 more days, to resolve bankruptcy cases.
The code will provide a specialised resolution mechanism to deal with bankruptcy situations in banks, insurance companies and financial sector entities.