RBI's Call for CoC Code of Conduct: A Game Changer in Insolvency Resolution

RBI Deputy Governor M Rajeshwar Rao advocated for an enforceable code of conduct for the Committee of Creditors (CoC) to enhance the insolvency resolution process under the Insolvency and Bankruptcy Code. He highlighted misalignments and emphasized the need for better cooperation between creditors and resolution professionals.

RBI Deputy Governor M Rajeshwar Rao on Saturday stressed the necessity for an enforceable code of conduct for the Committee of Creditors (CoC) within the insolvency resolution framework.

Speaking at a conference in New Delhi, Rao said the Insolvency and Bankruptcy Code (IBC) has succeeded as a recovery tool but faces issues with CoC performance. He noted disputes over valuation and creditor disagreements as significant challenges.

Rao emphasized self-regulation within CoC, pointing out problems with incentives and authority. He suggested compensation for resolution professionals should be market-driven, and noted that a strong formal insolvency process should deter defaults.

(With inputs from agencies.)