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IBC process helps recover Rs 70,000-crore bad loans in FY19: CRISIL

The recovery rate is twice the liquidation value of all 94 cases resolved says CRISIL.

Subrata Panda  |  Mumbai 

insolvency, bankruptcy, ibc
The IBC process has shifted the balance of power from the debtor to the creditor

Not only is the recovery rate of the 94 cases resolved so far under the and code (IBC) higher than the recoveries made through other mechanisms, the recovery rate is twice the liquidation value of the all the 94 cases resolved, said a report by credit rating agency

The recovery rate for the 94 cases resolved through IBC by 2018-19 (FY19) is 43 per cent, compared with 26.5 per cent through earlier mechanisms. Moreover, Rs 70,000 crore has been recovered in FY19, which is almost twice the figure recovered through the debt recovery tribunal, Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, and Lok Adalat in 2017-18.

As of March 2019, the number of outstanding cases under the IBC process is 1,143, of which 32 per cent cases are pending beyond the 270-day period slotted for the corporate resolution process. Moreover, there are a few big-ticket accounts for which resolution has not been finalised for over 400 days.

IBC recovery rate for cases in FY19 races ahead of other mechanisms: CRISIL

Although there is delay in resolving the cases, the IBC process has shifted the balance of power from the debtor to the creditor. A report from the Insolvency and Board of India states that almost Rs 2.02 trillion of debt pertaining to 4,452 cases was disposed of even before admission into the IBC process.

This gets reflected in slower accretion of new non-performing assets (NPAs) in the Indian banking system. According to estimates, the banking sector’s gross NPA (aggregate) has declined to 10 per cent as of March 2019, from 11.5 per cent the year before.


The Assessment

The IBC was introduced with the aim of providing an exit to failed and changing the recovery mechanism by ensuring time-bound settlement of dues. The code has helped lenders get back their loans within 320 days on an average, as opposed to over four years in the previous regimes. Even on other parameters like amount recovered, it has made a significant shift.

Compiled by Veena Mani

First Published: Tue, May 14 2019. 17:16 IST
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