However, failing to implement a resolution plan without going to the insolvency courts invokes penal provisions. Lenders effectively get 30 days to negotiate with defaulters before putting in motion a 180-day resolution plan with other lenders. Interestingly, the process of kicking off a resolution plan has also been eased with assent required from only 75% of lenders by debt value, and 60% by number, unlike earlier where all lenders had to agree to the resolution plan. Yet, by not resolving a default in effectively 210 days and by not dragging defaulters to insolvency courts, banks will have to make higher and penal provisions. Two, unlike RBI, the government has the legislative remit to construct a concrete track to insolvency courts for defaulters.

Source: Mint June 10, 2019 18:33 UTC