Moneycontrol PRO
Upcoming Event:Experts and leaders discuss how modern digital tools are transforming the media industry. Register now
you are here: HomeNewsBusiness

Economic Survey 2022: Cases worth Rs 1.48 lakh crore rescued under IBC; Rs 52,000 crore sent for liquidation

In value terms, around 74 percent of distressed assets were rescued. Of the CDs sent for liquidation, three-fourth were either sick or defunct and of the firms rescued, one-third were either sick or defunct, the Survey said.

January 31, 2022 / 03:37 PM IST
The data is provided by Bankbazaar.com. Interest rate on car loans for all listed (BSE) public and private sector banks have been considered for data compilation (excluding small finance banks). Banks for which data is not available on their websites have not been considered. Data has been collected from respective banks' website as on January 6, 2022. Banks have been listed in the ascending order, on the basis of interest rates - that is, bank offering the lowest interest rate on car loan is placed at the top and highest at the bottom. Lowest interest rates offered by the banks, irrespective of loan amount, has been taken into account. EMI is calculated on the basis of interest rates of listed banks, for Rs 10-lakh loan with tenure of seven years (processing and other charges are assumed to be zero for EMI calculation); Interest  mentioned in the table is indicative and it may vary depending on bank's t&c. * min Interest as per APR in Qtr ended in Sep 2021; ^ Rack Interest Rate;

The data is provided by Bankbazaar.com. Interest rate on car loans for all listed (BSE) public and private sector banks have been considered for data compilation (excluding small finance banks). Banks for which data is not available on their websites have not been considered. Data has been collected from respective banks' website as on January 6, 2022. Banks have been listed in the ascending order, on the basis of interest rates - that is, bank offering the lowest interest rate on car loan is placed at the top and highest at the bottom. Lowest interest rates offered by the banks, irrespective of loan amount, has been taken into account. EMI is calculated on the basis of interest rates of listed banks, for Rs 10-lakh loan with tenure of seven years (processing and other charges are assumed to be zero for EMI calculation); Interest mentioned in the table is indicative and it may vary depending on bank's t&c. * min Interest as per APR in Qtr ended in Sep 2021; ^ Rack Interest Rate;

 

As on September 2021, cases of a total of 421 corporate debtors (CDs) were resolved through Insolvency and Bankruptcy Code (IBC), while 1,419 cases were referred for liquidation, according to Economic Survey 2022.

The cases rescued had assets valued at Rs 1.48 lakh crore, while those referred for liquidation had assets valued at Rs 52,000 crore when they were admitted to Corporate Insolvency Resolution Process (CIRP), said the Survey.

In value terms, around 74 percent of distressed assets were rescued. Of the CDs sent for liquidation, three-fourth were either sick or defunct and of the firms rescued, one-third were either sick or defunct, the Survey said.

Also, nearly 65 per cent of the total admitted cases have been closed, either by resolution, withdrawal or liquidation, the Survey said.

Close

The Survey further said that out of the 1640 ongoing CIRPs, nearly 75 per cent of the cases has been ongoing for over 270 days.Interestingly, the realisable value of the assets available with the 421 CDs rescued when they entered the CIRP was only Rs 1.48 lakh crore, though they owed Rs7.94 lakh crore to creditors, according to the Survey.The resolution plans realised Rs2.55 lakh crore, which is more than 172 per cent of the realizable value of these CDs, it said.

“Though recovery is incidental under the Code, the Financial Creditors (FCs) recovered 32.11 per cent of their claims, which reflects the extent of value erosion by the time the CDs entered CIRP, yet it is the highest among all options available to creditors for recovery,” said the survey.

Further, the 1419 CDs ending up with orders for liquidation had an aggregate claim of Rs 7.38 lakh crore. However, they had assets, on the ground, valued only at Rs 52000 crore. Till September 2021, 264 CDs have been completely liquidated which had outstanding claims of Rs45,790 crore, but the assets were valued at Rs2,025 crore, the survey said, adding Rs 1,983 crore was realised through the liquidation of these companies.

Case for simplified voluntary liquidation

According to the survey, there is a case for simplifying the problems in the voluntary liquidation process, to improve ease of exit for business citing the various non-objection certificates needed to be taken to kick-start the process from departments

including Central Board of Direct Taxes, Central Board of Indirect Taxes and Custom, Employee Provident Fund Organisation and othersectoral regulators.

“Apart from simplifying the issues in the various steps in the processes, there is a need for the creation of a single window for the entire process. A portal that combines all the steps of the liquidation process altogether, starting from application by companies to processing by all departments will prove to be very useful,” the survey said.

Also, the Survey has pitched for a standardized framework for Cross-Border insolvency saying the current provisions under IBC are ad-hoc in nature and are susceptible to delay.

"Entering into mutual (reciprocal) agreements require individual long-drawn-out negotiations with each country. This leads to uncertainty of outcomes of claims for creditors, debtors and other stakeholders as well," the Survey said.



Download your money calendar for 2022-23 here and keep your dates with your moneybox, investments, taxes

Dinesh Unnikrishnan is Deputy Editor at Moneycontrol. Dinesh heads the Banking and Finance Bureau at Moneycontrol. He also writes a weekly column, Banking Central, every Monday.
Sections
ISO 27001 - BSI Assurance Mark