SBI's Rajnish Kumar urges investors to take part in stressed assets sector

State Bank of India (SBI) Chairman Rajnish Kumar on Thursday invited investors to take part in the country's stressed assets sector.

He also reiterated that the Insolvency and Bankruptcy Code (IBC) is not a recovery mechanism for lenders, but rather a means to preserve the value of enterprises.

He was taking part in an industry webinar on 'Opportunities for Investment in Stressed Assets in India' along with Insolvency and Bankruptcy Board of India (IBBI) Chairperson M S Sahoo.

Kumar said given the current situation globally due to the Covid-19 pandemic, it is an opportunity for investors to invest in the stressed assets of the Indian market.

"For everyone it has been a learning experience, including the lenders. All lenders initially thought that for us what matters is the recovery... But on several occasions, I and Mr Sahoo have made it abundantly clear that the purpose of IBC is resolution, it is not recovery mechanism and it is for preserving the value of the enterprises," Kumar said at the webinar organised by industry body FICCI.

There are broadly three major legal or regulatory frameworks under which resolution of stressed assets can take place -- the Companies Act itself, the IBC which was introduced in 2016 and the resolution framework of June 7, 2019 by the Reserve Bank of India, Kumar said.

Speaking about the IBC, Kumar said banks are one of its beneficiaries and given the size of SBI, the law has definitely brought about a paradigm shift in dealing with stressed assets.

"In absolute size, our portfolio is very large, almost Rs 1.5 trillion. IBC 2016 has definitely changed and brought paradigm shift as far as dealing with the resolution of stressed assets is concerned.

"And here the IBBI, the lenders committee represented by IBA, they all have worked in close coordination along with the regulators to make the necessary amendments in the law wherever required," he said.

He also said it was an achievement for the country that such a law could be implemented, adding many high profile cases have been resolved under the framework.

Had there been no such law, it would have taken a lot of time for resolution of stressed assets, he said.

"Earlier the cases would never get resolved. So when we talk about the delays of the time taken to resolve the cases, this is a much much improved situation and further steps have been taken by the Ministry of Corporate Affairs to augment the infrastructure around dealing with the cases," he pointed out.

Sahoo said India's position in terms of resolving cases under insolvency has improved to 52nd from 136th earlier, as per the World Bank's ranking.

"India is by far now the best performing country in South Asia in resolving insolvency and is better than the average of the high income economies in terms of recovery rate, time taken and cost of the process," the IBBI chief said.

He said there is a good investment opportunity for investors in the Indian stressed assets market.

"Each of the stress asset is an entry point of investment and investors may invest in distressed assets," Sahoo said.