NEW DELHI, Feb. 17 -- The viability of businesses entering bankruptcy proceedings should be tested in the first month before they're allowed to operate as going concerns, the Insolvency and Bankruptcy Board of India (IBBI) has proposed in a set of new draft regulations.

Interim resolution professionals acting on behalf of lenders should limit the operations of such companies to the minimum and ensure they are not mechanically run as a going concern in the first 30 days of bankruptcy proceedings when the panel of creditors is being set up.

Once the panel of creditors is formed, the resolution professional should submit a 'going concern assessment' about the viability of the distressed business at its first meeting so that unviable ones a...