Debt recovery mechanism strengthened with IBC, claims of Rs 1.73 lakh crore settled: Eco Survey

The Insolvency and Bankruptcy Code (IBC) is one of the most important economic reforms of recent times and the debt recovery mechanism has strengthened with claims worth over Rs 1.73 lakh crore settled so far under the new law, the Economic Survey said.

Till March 31, 2019, the Corporate Insolvency Resolution Process (CIRP) yielded a resolution of 94 cases which has resulted in the settlement of claims worth Rs 1,73,359 crore, it said.

"The NCLT (National Company Law Tribunal) infrastructure requires to be scaled up so as to achieve timely resolution of debt recovery. The debt recovery mechanism strengthened with the enactment of IBC, 2016," the Economic Survey 2018-19 said.

It said the ecosystem for insolvency and bankruptcy is getting systematically built out with recovery and resolution of significant amount of distressed assets.

"The government is actively considering measures to address delays and has created six additional posts of the judicial and technical members for NCLAT. Setting up circuit benches of NCLAT is under consideration," the Survey suggested.

Also, as on February 28, 2019, 6,079 cases involving a total amount of Rs 2.84 lakh crore have been withdrawn before admission under provisions of the IBC, it said.

Citing RBI reports, the Survey authored by a team led by Chief Economic Adviser Krishnamurthy V Subramanian, said Rs 50,000 crore has been received by banks from previously non-performing accounts.

RBI also reports that additional Rs 50,000 crore has been 'upgraded' from non-standard to standard assets.

Taking note of the accelerated recoveries, the Survey said all these show behavioural change for the wider lending ecosystem even before entering the IBC process.

The Survey said that IBC has initiated a cultural shift in the dynamics between lender and borrower, promoter and creditor.

Before enactment of the IBC, the recovery mechanisms available to lenders were through Lok Adalat, Debt Recovery Tribunal and SARFAESI Act.

"While the earlier mechanisms resulted in a low average recovery of 23 per cent, the recoveries have risen to 43 per cent under the IBC regime. '