Pre-Insolvency Early Warning System Under Study in India
Why in the news
The government and the insolvency regulator are looking at a system that would flag financial trouble before default, acting on a Supreme Court suggestion.
Key facts
- Bodies: Ministry of Corporate Affairs and IBBI.
- Today the IBC acts only after default.
- Goal: let firms and lenders track distress and cut the NCLT load.
| Proposed feature | Detail |
|---|---|
| Stress indicators | Financial ratios, continuous disclosure, sector red flags |
| Risk reporting | Directors and auditors may report distress to regulators and creditors |
| Mediation | Pre-insolvency restructuring platforms for promoters, creditors, regulators |
| Sector triggers | Industry-specific interventions by IBBI |
About IBBI
- Regulator under the Insolvency and Bankruptcy Code, 2016; set up 1 October 2016.
- Headquarters New Delhi; parent ministry MCA.
Exam angle
- Tribunal: NCLT; statute: IBC, 2016.
- Concept: pre-insolvency versus post-default resolution.