Insolvency process: RBI Deputy Guv pitches for enforceable code of conduct for CoC
The Hindu
Reserve Bank Deputy Governor calls for enforceable code of conduct for Committee of Creditors in insolvency resolution process.
Reserve Bank Deputy Governor M. Rajeshwar Rao on Saturday (December 7, 2024) pitched for an enforceable code of conduct for the Committee of Creditors (CoC) under the insolvency resolution process.
While emphasising that the Insolvency and Bankruptcy Code (IBC), which was introduced in 2016, has gained significant traction as a recovery and resolution mechanism, Mr. Rao also said significant improvements are needed with respect to the area of CoC.
CoC has a key role in implementing the corporate insolvency resolution process under the IBC.
At a conference in the national capital, Mr. Rao said there have been instances where the CoC's performance has been found lacking in several aspects.
"This includes disproportionate prioritisation of individual creditors' interests over the collective interests of the group, disagreements among the CoC members on approving the resolution plan due to concerns about undervaluation and perceived lack of viability, disagreement over the distribution of the proceeds," he said.
Even when the resolution plan is agreed upon, Rao said there have been instances of non-participation in the CoC meetings and a lack of effective engagement, coordination or information exchange among the members.
According to the Reserve Bank of India (RBI) Deputy Governor, nominees of financial creditors in CoC are entrusted with responsibilities that far exceed their actual authority.
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