GS Paper 3
Context: NITI Ayog recommendations to achieve monetisation goal.
NITI Ayog recommendations: to improve retail participation
- To make the National Monetisation Pipeline (NMP) a success, the government should give Income tax breaks to attract retail investors into instruments like Infrastructure Investment Trusts (InvITs).
- Though this will entail a cost in the form of loss of revenue for exchequer, the long-term benefits may outweigh the cost as linking investments in specified bonds with the capital gains exemption had proved to be success in the past.
- Bringing InvITs under the ambit of the Insolvency and Bankruptcy Code (IBC) to provide greater comfort to investors.
- Since the trusts are not considered as ‘legal person’, the IBC regulations are not applicable for InvIT loans. Hence, the lenders do not have existing process for recourse to project assets.
- While the lenders are protected under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Recovery of Debts and Bankruptcy Act, 1993, the provision of recourse under IBC regulations will bring in added level of comfort for the investors.
- It would help lenders access a faster and more effective debt restructuring and resolution option.
Read about National Monetisation pipeline (NMP) Here:
InstaLinks:
Prelims Link:
- About NMP.
- Key features of NMP.
- Applicability.
- Benefits.
Mains Link:
Discuss the significance of the National Monetisation Pipeline (NMP) project.
