RERA Registration

NBFCs with assets worth 500 Crore shall be brought under IBC purview

NBFCs with assets worth 500 Crore shall be brought under IBC purview
Dashmeet Kaur
| Updated: Dec 30, 2019 | Category: NBFC, News

On November 18, 2019, the Ministry of Corporate Affairs in consultation with Government of India and RBI has issued a notification. It notifies the rules under Section 227 of the Insolvency and Bankruptcy Code (IBC), 2016. It enables the National Company Law Tribunal to pass an order of faster resolution plan for Non-Banking Financial Companies (NBFCs). Read to know more NBFCs with assets.

Thumbnail of the Story

The Government sets up regulations under the IBC to ensure the resolution of stressed HFCs and NBFCs. MCA notification will permit the existing consortium of lenders and the current resolution professional to undertake the financial services of NBFC to the NCLT. Have a look at the crux of the notification:

  • As per the new IBC provisions (Non-Banking Financial Companies) NBFCs and (Housing Finance Companies) HFCs with assets worth Rs 500 Crore shall be taken for debt resolution & liquidation proceedings.
  • Further, this step will help NBFCs to overcome the problem of the liquidity crisis.
  • As per a source “, once banks take upon NBFC for the resolution to the NCLT, all the cases filed by disparate creditors will get nullified.”
  • The action which boosts such resolution in cases like DHFL is that different creditors pursue variant recovery methods.
  • For instance, several bondholders move to debt recovery tribunals in fear of a haircut. However, once the insolvency resolution plan came into effect under the NCLT mechanism, no creditors can go to separate forums for relief.

NBFCs and HFCs Response to the MCA Notification

Though many NBFCs embrace the insolvency resolution with open arms, others show their disapproval. In the case of DHFL (Dewan Housing Finance Corporation Ltd.), most stakeholders were in favour of the resolution, but some bondholder’s exhibits dissent. Besides, they sought repayment of their full dues and filed cases in courts, sources familiar with the said development.

As per the reports of the debt resolution plan 2019, DHFL with outstanding loans of about Rs 78,000 Crore has faced liquidity pressure since the IL&FS crisis hit the NBFC sector in September 2018. A list of debt defaults by IL&FS has risen into a broader liquidity crisis for the markets that put pressure on several NBFCs.

Conclusion

Lately, NBFCs and HFCs have been facing much stress to honour its debt repayments, and thus they started selling profitable subsidiaries to raise funds. DHFL and promoter firm, Wadhawan Global Capital, has sold around 80% of its combined stake in education loan Company namely, Avanse Financial Services Ltd. Moreover, the Wadhawan Global Capital has also sold its 70% of stake to Aadhar Housing Finance and Blackstone group. Hence, one can foresee that insolvency resolution will bring a positive change for NBFC and HFCs.

  • 3
  • 1
  •  
  •  
  •  
  •  
  •  
  •  
    4
    Shares
Dashmeet Kaur

Dashmeet Kaur is an experienced content writer, having proficiency in writing Legitimate content with comprehensive research. She also has a keen eye to detail and incorporating accurate facts.

Top rated CA Service provider
 

Related Articles

What are the Aspects of Legal Due Diligence of NBFC
Savvy Midha
| Date: Oct 15, 2019 | Category: NBFC, RBI Advisory

What are the Aspects of Legal Due Diligence of NBFC

Non-Banking Financial Company Non-Banking Financial Company (NBFC) is an essential segment in the financial sector.They are registered under the Companies Act and regulated under the RBI Act. NBFC is used...

Read More
Extension of Due Dates for Tax Audit Report and ITR in AY 2020-21
Shivani Jain
| Date: Nov 06, 2020 | Category: Income Tax, News

Extension of Due Dates for Tax Audit Report and ITR in AY 2020-21

The Central Bureau of Direct Taxes (CBDT) by way of a Press Release issued on 24.10.2020 had extended the due dates for submitting the Tax Audit Report and Income Tax...

Read More
GST Council reduces rate on Electric Vehicles slashed from 12% to 5%, effective from 1st August
Khushboo Priya
| Date: Jul 30, 2019 | Category: GST, News

GST Council reduces rate on Electric Vehicles slashed from 12% to 5%, effective from 1st August

In an endeavour to encourage the adoption of electric vehicles, the GST council on 27th July 2019, Saturday, decided to cut the tax rates on electric vehicles. The GST on...

Read More

ARTICLES

Hi! My name is Akanksha! Let's talk.