PSB debts: Rajan calls for fair bankruptcy laws

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RBI governor Raghu Ram Rajan who is involved in the most unenviable job of cleaning up the debt books of banks, particularly public sector banks (PSBs), has called for even-handed and equal application of law while resolving the issue of distressed debts. This is significant as it coincides with Union Finance Minister Arun Jaitley’s statement at the India Investment Summit on Thursday that the joint committee of Parliament studying the insolvency and bankruptcy code will submit its report by the first week of March and the passage of the reform legislation may be possible during the Budget session scheduled to begin February 23.
Delivering the Nani Palkhivala Memorial lecture in Mumbai, Rajan pointed out that “laws applied more quickly to small firms… sometimes with a bias to creditors. Laws become more draconian to give powers to creditors. However, operational and speedy bankruptcy code will level the playing field.” He added the government and the regulators are needed to set the rules of the game and enforce behaviors. “Biased government /regulation distors the playing field. It’s not that there should be no handicaps but not unequal handicaps.”

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