The Ministry of Corporate Affairs (MCA) is working with the finance ministry, Reserve Bank of India and the Indian Banks' Association (IBA)  to issue a code of conduct for creditors under the Insolvency and Bankruptcy Code (IBC), said MCA Secretary Rajesh Verma on Friday.

This comes a month after a Parliamentary panel flagged the “disproportionately large and unsustainable ‘haircuts’ taken by the financial creditors over the years”. In some insolvency resolution processes, the haircuts taken by creditors were more than 90 percent.

The role of the Committee of Creditors (CoC) is crucial in deciding a resolution plan under the Insolvency and Bankruptcy Code (IBC), which provides for a market-linked framework for resolving stressed assets. The discussions on the issue of the conduct of CoC in the context of the insolvency resolution process assume significance amid recent instances of creditors taking steep haircuts on their exposure under resolution plans. "We are working with IBA, RBI and Department of Financial Services on the very important issue of the conduct of CoC," Corporate Affairs Secretary Rajesh Verma said.

According to him, the IBBI has been working on increasing the capacity of CoC through various seminars and addressing the market issues. Verma said erosion of the value of a debtor before it comes to CIRP (Corporate Insolvency Resolution Process) is a matter of concern and emphasized that "timing and asset preservation is of real essence".

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