Page 48 - Banking Finance December 2023

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more importantly what about the basic wage hikes for the collaborative effort from various stakeholders to create an
people working in the unorganised sector? There are various enabling environment that fosters innovation, supports
data points which suggest that wage hikes are stagnant. digital infrastructure development, and promotes financial
literacy. By doing so, we can truly harness the power of
By leveraging technology, financial institutions and fintech technology to drive positive change and empower the
companies can reach a wider pool of individuals in the unorganized sector in our economy. A lot of work needs to
unorganized sector, enabling them to access affordable and be done here on not just tracking their work but bringing
timely credit. The use of digital platforms, mobile them under the social safety net. That's when perhaps more
applications, and alternative data sources allows for efficient people will be able to get credit.
evaluation of creditworthiness, reducing the reliance on
traditional collateral-based assessments. Reference:
How Prime Minister Mudra Yojana (PMMY) has
Overall, the transformation of the unorganized sector revolutionized the Socio Cultural Fabric of Nation in a
through technology-enabled credit dispensation has the short span- SBI research and development
potential to unlock opportunities, foster inclusive growth, Mudra website
and uplift the livelihoods of individuals. It requires a From formal to informal economy- BFSI.com

Lenders worry tax collectors will take a bite out

the recovery

D ue to a Supreme Court ruling that places tax had a lesser priority. The ruling seemed to have disregarded
departments and government agencies on the
the provisions of the IBC on its primacy and overriding
impact, in addition to being against the legislative intent,
same footing as secured creditors under the
IBC, banks are facing a narrowed window of
opportunity to recover from bankrupt and insolvent which explicitly reduced the precedence of government
dues, according to Abhishek Swaroop, partner at Saraf &
borrowers. Partners.
According to bankers, delays in resolution have resulted in The phrase "liquidation waterfall" describes the method by
a decline in recoveries under the Insolvency and Bankruptcy which current stakeholders will be compensated in the event
Code. Following the Supreme Court's ruling, tax authorities of a company's liquidation; it prioritizes payment to creditors.
will probably want a sizable portion of the proceeds. "The ruling has caused uncertainty, as it is evident that the
According to senior bankers, the government needs to find financial lenders' interests have been jeopardized. In order
a solution to this problem in order to keep the IBC process to resolve the question definitively, Swaroop stated that the
useful for lenders. circumstances justify referring it to a higher bench.
Numerous petitions asking for a reexamination of the "Including alteration in the order of priority of payment of
Supreme Court bench's previous ruling in the Rainbow Papers government dues" is mentioned in the preamble outlining the
bankruptcy case were denied. According to the previous main goals of the IBC. The Act prioritizes payments to state
order, statutory creditors under the IBC, such as tax and federal governments over unsecured creditors. The
authorities and government entities, would be regarded as current interpretation undermines the fundamental
secured creditors. framework of the IBC and jeopardizes the ranking of secured

"The ruling in the Rainbow Papers case changed the creditors. As the fundamental safety net for lending, I hope
statutory prescription under the IBC, meaning that "secured the government takes action to restore the validity of
creditors," who had a far higher priority in the "liquidation creditors' rights over charged assets," stated Hari Hara
waterfall," were equated with "government dues," which Mishra, CEO of the Association of ARCs in India. (Refer to ToI.)

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