What to expect from the Monsoon Session?

Finshots

What to expect from the Monsoon Session?

What to expect from the Monsoon Session? | Finshots Daily Newsletter

In today's Finshots we discuss a few key reforms that could take shape as the parliamentary session kicks in today


Policy

The Story

The monsoon session of 2021 is upon us and we could see as many as 23 bills being tabled, discussed, and passed into law. However, some of these merit more attention than others, and we will discuss items that we believe fit our mandate.

1. The Insolvency and Bankruptcy Code (Amendment) Bill, 2021

IBC does a pretty good job while dealing with bankruptcies. At least for the most part. However, considering we’re seeing new cases being logged in each day, it’s almost certain that courts will soon be overburdened. So we need a solution that could help us alleviate some of this burden. And the new amendment is expected to do just that by including a pre-packaged insolvency resolution scheme for Small and Medium Enterprises.

In fact, we spoke out about this in one of our stories a few months ago.

When a company becomes insolvent, lenders have two options. They can drag the company to bankruptcy court and initiate proceedings, or they could devise a rescue plan internally. Now the first option is codified within the IBC. The courts appoint a neutral person to oversee the resolution and all the lenders get together and work in conjunction with the professional to resolve matters. Meanwhile, the management loses control of all day-to-day affairs and the neutral party is left to manage operations. However, this whole rigmarole is a drag on the courts.

A better option — at least intuitively is to “pre-pack” a solution before you approach the courts. That’s to say that maybe we can have a process where lenders work with the management internally before submitting a resolution plan to the courts. This way, the courts won’t be overburdened and the management can even retain control of their companies.

Hopefully, with the new amendments, we will see a faster and more optimized outcome when companies go bankrupt.

2. The Electricity (Amendment) Bill, 2021

Touted as a major reform in the power sector, the legislation will offer consumers the freedom to choose between power distributors and will also allow private players to compete with legacy Discoms. Meaning you will no longer have to put up with a single provider. Instead, you can pick and choose as you like. Also, the amendments will seek to tightly enforce renewable power purchase obligations i.e. distributors will have to purchase a certain amount of power from renewable sources or face strict penalties.

3. Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021

We all know how a few troubled banks have ruined depositors in the recent past. And considering the Finance Minister had already promised to offer some extra protection, we were bound to see some changes. And if the amendments go through without a hitch, bank deposits will now be insured up to ₹5 lakh as opposed to ₹1 lakh earlier.

4. The Coal Bearing Areas (Acquisition and Development) Amendment Bill, 2021

With this legislation, the government wants to make it easier to procure land that harbors coal deposits. In fact, if the bill passes, coal and mining rights could easily be leased to private sector companies as well. Hopefully the new amendments helps us make the most out of our coal assets.

5. The Factoring Regulation (Amendment) Bill

When a company desperately needs cash, it can mobilize these funds in a number of ways. It could borrow money, it could bring in new investors or it could dabble with something called invoice factoring. For instance, if you're a company and you’ve raised an invoice, you know there’s a payment due. However, your customers may have the leeway to settle the invoice at some future date and you may have to struggle for cash in the meantime. With invoice factoring, you can sell your invoice at a discount to a third party and raise money immediately. Granted you’re taking a small hit, but you’re doing it in an attempt to get as much liquid cash as you can right now. The third-party will eventually collect payment when the invoice is due, but that’s of no concern to you because your problems are sorted.

And you can see how this can be a quick and easy way for companies to raise capital. However as of today, this business is tightly regulated, and the amendments hope to change that. If everything works out, we could soon see hundreds of Non-Banking Financial Corporations (NBFCs) dabbling with invoice factoring as opposed to the seven NBFCs we have today.

All in all, we could see several key reforms take shape in the next few months. However, that doesn’t mean everything is hunky-dory either. There is the conspicuous absence of bank privatization bills and there is no mention yet of any legislation surrounding cryptocurrencies. We were supposed to know how the government was going to treat these digital assets, but so far, we’ve had little clarity on the front.

In any case, we hope that the other reforms do kick in. Until then…

Don't forget to share this Finshots on WhatsApp, LinkedIn and Twitter





Copyright © Finception. All rights reserved.

You are receiving this email because you have subscribed via our website

Our mailing address is:

Finception

Ideapad, CIIE,

IIM Ahmedabad,

Ahmedabad 380015,

India

No longer interested in Finshots?Unsubscribe








This email was sent to you
why did I get this?    unsubscribe from this list    update subscription preferences
Finception · Ideapad, CIIE, · IIM Ahmedabad · Ahmedabad 380015 · India

Older messages

Why Reliance acquired Just Dial?

Tuesday, July 20, 2021

Finshots Why Reliance acquired Just Dial? Last Friday, Reliance Retail announced that it was acquiring a controlling stake in Just Dial for about 5700 crores. And while that may not be a gargantuan sum

Weekly Wrapup: In with the new

Saturday, July 17, 2021

Finshots Weekly Wrapup: In with the new In this week's wrapup we talk about Zomato's IPO, reforming the power sector, a new order for capitalism, a new airline, and finally Elon Musk's day

A new airline in town?

Friday, July 16, 2021

Finshots A new airline in town? In today's Finshots we discuss how a new airline company could take off (no pun intended) right in the middle of a pandemic Business The Story There was an

Elon Musk's day in court

Friday, July 16, 2021

Finshots Elon Musk's day in court In today's Finshots we discuss the acquisition of SolarCity and see why Musk is being made to testify in court. Business The Story SolarCity made and sold

A new order for Capitalism

Wednesday, July 14, 2021

Finshots A new order for Capitalism In today's Finshots we talk about an executive order that will likely change how capitalism works in the US Policy The Story “Capitalism without competition isn

Is India getting its own digital currency?

Wednesday, July 28, 2021

Finshots Is India getting its own digital currency? A few days back we began hearing whispers about a central bank digital currency (CBDC) and how the RBI is working on it as we speak. So in

Back-to-School Shopping Will Be More Expensive This Year

Wednesday, July 28, 2021

Shoppers should expect shortages and higher prices on computers and other school supplies. July 27, 2021 SHOPPING Back-to-School Shopping Will Be More Expensive This Year Shoppers should expect

Going backwards

Tuesday, July 27, 2021

Bloomberg It was a wrenching first hearing before the special Congressional panel investigating the deadly Jan. 6 insurrection. On that day almost seven months ago, when Congress was formalizing the

🎉 Apple, Alphabet, Microsoft: boom

Tuesday, July 27, 2021

Microsoft has requested permission to smash it | Please eject Apple before fist-pumping vigorously | Finimize Hi Reader, here's what you need to know for July 28th in 3:10 minutes. 🧐 The 1% have

Opinionated: Better Money Storylines Anyone?

Tuesday, July 27, 2021

Plus, retirement dreams and leveling up your career game. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Will Robinhood Start Offering Retirement Accounts?

Tuesday, July 27, 2021

7 Things That Are Getting More Expensive July 27, 2021 Every young generation rejects the practices of those that came before. It's a tale as old as time — or at least as old as baby boomers not

[New post] Slow recoveries, endogenous growth and macroprudential policy

Tuesday, July 27, 2021

BankUnderground posted: " Dario Bonciani, David Gauthier and Derrick Kanngiesser Following the global financial crisis in 2008, central banks around the world introduced tighter banking

Why cigarette companies want you to quit smoking

Tuesday, July 27, 2021

Finshots Why cigarette companies want you to quit smoking In today's Finshots we talk about why Philip Morris wants to stop selling cigarettes Business The Story Jacek Olczak, the CEO of Philip

Bitcoin Prices Soar on Speculation Amazon Will Soon Accept Cryptocurrencies as Payment

Tuesday, July 27, 2021

A job posting offers a tantalizing clue. July 26, 2021 EVERYDAY MONEY Bitcoin Prices Soar on Speculation Amazon Will Soon Accept Cryptocurrencies as Payment A job posting offers a tantalizing clue.

China wipeout

Monday, July 26, 2021

Bloomberg Beijing's intensifying crackdown on its own technology sector is being felt across global markets, erasing $769 billion in value from US-listed Chinese stocks in just five months. On