As of March 31, 2019, corporate insolvency resolution process resolved 94 cases, resulting in settlement of claims worth Rs 1,73,359 crore
Chief Economic Adviser K V Subramanian's maiden Economic Survey 2018-19 points out that the Insolvency and Bankruptcy Code (IBC), 2016, has systematically bettered India's debt recovery mechanism and it further proposes the strengthening of the National Company Law Tribunals (NCLT) and the appellate tribunal.
The Survey finds that the ecosystem for insolvency and bankruptcy is getting systematically built out with recovery and resolution of a significant amount of distressed assets.
As of March 31, 2019, corporate insolvency resolution process resolved 94 cases, resulting in settlement of claims worth Rs 1,73,359 crore.
Till February 28, 2019, 6,079 cases involving a total amount of Rs 2.84 lakh crore have been withdrawn before admission under provisions of the IBC.
Further, as per Reserve Bank of India reports, Rs 50,000 crore has been received by banks from previously non-performing accounts. The 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 says that all these shows behavioral change for the wider lending ecosystem even before entering the IBC process.
The Survey termed IBC as "one of the most important economic reforms of recent times designed to effectively deal with non-performing corporate debtors". The Survey also says that in order to achieve time-bound debt resolution, the NCLT infrastructure needs to be scaled up.
“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 said.
The Survey also notes that the IBC has brought about a cultural change in the lender-borrower dynamics. "Before enactment of the IBC, the recovery mechanisms available to lenders were through Lok Adalat, Debt Recovery Tribunal and SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest) Act. While the earlier mechanisms resulted in a low average recovery of 23%, the recoveries have risen to 43% under the IBC regime," the Survey shows.
The Survey also notes that since the enactment of the IBC, India has significantly improved its ‘Resolving Insolvency’ ranking to 108 in 2019, from 134 in 2014, where it remained stagnated for several years.
Last year India won the Global Restructuring Review award for the most improved jurisdiction. An IMF-World Bank study in January 2018 observed that “India is moving towards a new state-of-the-art bankruptcy regime”.
The Survey said that most developed economies have well-formed cross border insolvency laws and India has initiated steps to adopt the United Nations Commission on International Trade Law (UNCITRAL) model on Cross-Border Insolvency.The Insolvency and Bankruptcy Board of India has also set up two separate working groups on group and individual insolvencies.