This is done to ensure MSMEs are insulated from being dragged to the courts on defaults considering the COVID-19 situation.
Finance Minister Nirmala Sitharaman on May 17 said the goverment will soon bring an ordinance to increase the minimum threshold to initiate insolvency proceedings to Rs I crore from Rs 1 lakh.
This will help insulate the micro, small and medium enterprises (MSMEs) from being dragged to court under the Insolvency and Bankruptcy Code (IBC).
This was part of the fifth tranche of measures Sitharaman announced to revive the flagging economy.
Sitharaman said the special insolvency resolution framework for SMES under Section 240A of the Code will be soon notified.
Sitharaman said the government has also suspended fresh initiation of insolvency proceedings up to one year keeping in view the coronavirus pandemic .
Among other measures, COVID 19-related debt has been exempted from the definition of "default" under the Code for the purpose of triggering insolvency proceedings, Sitharaman said.