The Insolvency and Bankruptcy Code (IBC) mechanism has worked well to support ‘Ease of Doing Business’ in India by easing exits with time-bound resolutions for the companies, the Economic Survey 2023 , which was tabled in Parliament on January 31, has said.
“These strengths are helping the financial system absorb external spillovers, tightening global financial conditions and high volatility in financial markets,” the survey said.
The Economic Survey details the country's performance over the last year while underlining key challenges that lie ahead along with measures to deal with them. It essentially lays the groundwork for the presentation of Union Budget.
Follow our live blog for the latest on the Economic Survey 2023
As per the Reserve Bank of India (RBI) data, in FY22, the total amount recovered by the schedule commercial banks (SCBs) under IBC was the highest compared to other channels such as Lok Adalat’s, SARFAESI Act and DRTs in this period.
According to the survey document, 5,893 Corporate Insolvency Resolution Processes (CIRPs) had commenced by end-September 2022, of which 67 per cent have been closed since the inception of the IBC in December 2016.
Of these, around 21 per cent were closed on appeal or review or settled, 19 per cent were withdrawn, 46 per cent ended in orders for liquidation, and 14 per cent culminated in the approval of resolution plans.
The Code also provides for a Corporate Debtor (CD) to voluntarily liquidate itself subject to the fulfilment of certain conditions as prescribed under the Code. 1,351 corporate persons initiated voluntary liquidation under the Code as of end-September 2022.
52 percent of the ongoing CIRPs belong to industry, followed by 37 per cent in the services sector by September 2022, revealed sectoral analysis.
Further, within the industry, 74 per cent of the initiated CIRPs was from the manufacturing sector. Of these, the textile, basic metals and food sectors accounted for 48 per cent of the ongoing CIRPs.
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