After the RBI referred 12 businesses to be covered under the insolvency laws, there were fears among the business community that they too may face similar action. However, the government has come forward to clear the doubts in the minds of business leaders. Assuring businesses that their interests will be given priority, Finance Minister Arun Jaitley said today that they need not be afraid of insolvency laws. Jaitley said that insolvency laws are designed to help the businesses and not banish them. He said that insolvency laws aim to create a win-win for all stakeholders by ensuring that bad debts of lenders are reduced and businesses get another opportunity to make a fresh start.
“The old regime by which the creditor would get tired of chasing the debtor and end up recovering nothing is over now. If a debtor has to survive, he will have to service his debt. Or, he will have to make way for somebody else,” Jaitley said. Jaitley said that the primary objective of insolvency laws is to save the businesses that are facing problems with repaying their debts. He said that insolvency laws would unlock new opportunities wherein troubled businesses can seek new partnerships to effectively manage their debts. It may be recalled that it has become unavoidable for the RBI to initiate insolvency proceedings against certain companies since banks are reeling under a huge burden of non-performing assets (NPAs), amounting to a staggering Rs 8 lakh crore.