Insolvency code recoveries shrink to 33% – The New Indian Express

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By Express press service

NEW DELHI: The much-vaunted reform of the Narendra Modi government – the Insolvency and Bankruptcy Code (IBC) – is floundering as recoveries under the IBC continue to decline. Banks have on average taken a 67% haircut in all insolvency cases that have been resolved so far.

In 458 cases resolved by the IBC, creditors recovered only Rs 2.5 lakh crore, or just 33% of the total admitted claims of Rs 7.5 lakh crore. The IBC, which is seen as one of the most important reforms of the Narendra Modi government for its potential to quickly resolve large NPA cases but also make good collections from defaulting borrowers, has been marred by delays as well. than a low recovery.

Until March 2020, average recoveries were 40-45%, but over the past year things have only gotten worse. The figure released by the insolvency regulator up to December 2021 shows that of the 37 cases resolved in the October to December 2021 quarter, creditors were only able to recover 13% of the admitted claims of Rs 33,000 crore. Experts say the government must act quickly and effect a paradigm shift if it is to prevent the CIB from becoming another ineffectual legislature.

Neeti Sikha, associate dean of the Indian School of Public Policy, and who has worked closely with the government to make various changes to the IBC, says the delay is due to several reasons – due to lack of capacity of courts, the lack of a well-developed market for the sale of stressed assets, and because of the size of debt in India. The average case resolution time is also increasing every year.

The average time to resolve a case was 411 (vs. 330 days) through March 2020. Between April and December 2021, the average time to resolve 98 cases was 709 days. So far, 1,514 cases have gone into liquidation, meaning these many companies have been unable to find a bidder under the IBC.

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