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Govt planning to give debt waiver for small distressed borrowers under IBC

19 Aug 2019 Evaluate

Corporate Affairs Secretary Injeti Srinivas has said that the government is planning to give debt waiver for small distressed borrowers as part of 'Fresh Start' provisions under the Insolvency and Bankruptcy Code (IBC) framework. He said the government has held discussions with the microfinance industry regarding criteria for the proposed waiver for small distressed borrowers from the economically weaker section (EWS). He emphasized that the waiver-as part of individual insolvency-would be for the most distressed within the EWS.

Srinivas said 'If you have once availed the fresh start, then you cannot avail it again for five years. We have worked out all safeguards to the satisfaction of the microfinance industry. It will be like taking haircuts. At a national level, over a three to four years period, it will be not more than Rs 10,000 crore.' He further said that the IBC provisions pertaining to personal guarantor to corporate debtor would be coming into effect immediately, followed by those related to partnership and proprietorship. He said 'then we will look to bring fresh start provision.' 

As per the IBC, there are various thresholds for 'fresh start', including that the gross annual income of the debtor does not exceed Rs 60,000. The aggregate value of the debtor's assets should not be more than Rs 20,000 and that the aggregate value of the qualifying debts does not exceed Rs 35,000. Among others, such a person should not be having an own dwelling unit, irrespective of whether it is encumbered or not.

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