Coming: Insolvency law for civic bodies

Move to boost credit profile & capex of urban local bodies

- MANU KAUSHIK

AFTER AMENDMENTS TO the Insolvency and Bankruptcy Code (IBC), currently under the consideration of a select committee of Parliament, the government may look at drafting a separate legislation for handling insolvency of urban local bodies (ULBs) and municipal corporations, official sources told FE.

The move is intended to inspire confidence among lenders to these entities, which play a critical and rising role in city infrastructure creation, besides being responsible for provisions of public services like water supply, sanitation, etc.

"Currently, the creditors are sceptical of lending money to municipalities which is affecting their ability to undertake capital expenditure. A dedicated insolvency legislation will lower the risk for lenders which would be willing to lend to them at lower rates. For municipalities, this will also provide a wider pool of capital to source from," an official said. "An insolvency mechanism designed for urban local bodies could jumpstart the investments to enhance the urban infrastructure," the person added.