The Insolvency and Bankruptcy Board of India (hereinafter referred to as “IBBI”) signed a Memorandum of Understanding with the Reserve Bank of India (hereinafter referred to as “RBI”) on March 12, 2018. The purpose of the MoU is to assist and cooperate with each other for effective implementation of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”).
Need of MOU between IBBI and RBI
IBBI, set up on October 1, 2016 under the Code, is responsible for making and enforcing laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals. The IBBI enforces procedures of corporate insolvency resolution, corporate liquidation and individual insolvency resolution under the Code. IBBI ensures the implementation of the processes in a time bound manner to promote entrepreneurship and balance the interests of all stakeholders. The IBBI also exercises regulatory oversight over the adjudicating authorities under the Code, i.e., Insolvency Professionals, Insolvency Professional Agencies and Information Utilities.
In view thereof, IBBI has signed a Memorandum of Understanding (hereinafter referred to as “MoU”) with RBI which is the central bank in India and seeks to secure monetary stability in India. By virtue of the MoU, the IBBI and the RBI envisage to effectively implement the Code and its rules and regulations.
About the MoU
The MoU signed between IBBI and RBI consists of various provisions including the following-
- Sharing of information between the two parties, subject to the limitations imposed by the applicable laws
- Sharing of resources available with each other to the extent feasible and legally permissible
- Periodic meetings to discuss matters of mutual interest, including regulatory requirements that impact each party's responsibilities, enforcement cases, research and data analysis, information technology and data sharing, or any other matter that the parties believe would be of interest to each other in fulfilling their respective statutory obligations
- Cross-training of staff in order to enhance each party's understanding of the other's mission for effective utilization of collective resources
- Capacity building of insolvency professionals and financial creditors
- Joint efforts towards enhancing the level of awareness among financial creditors about the importance and necessity of swift insolvency resolution process of various types of borrowers in distress under the provisions of the Code
The MoU between the insolvency regulator and the banking regulator is envisaged to strengthen the efficiency of insolvency and bankruptcy processes. Efforts to increase awareness among financial creditors, emphasizing on swift insolvency resolution process and capacity building of insolvency professionals and financial creditors is a way forward to effective implementation of the Code. However, with respect to sharing of resources between the authorities, such process should be monitored in order to avoid misuse of resources which may adversely affect interest of stakeholders involved in insolvency and bankruptcy proceedings.