IBC: From 553 cases resolved till September, financial creditors realised 33% of value, says government

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Last year until September, 553 cases had been resolved through the Insolvency and Bankruptcy Code (IBC), but financial creditors realised only about one-third of the total value, the government said on February.

While the realisable value to financial creditors was 32.95 percent of their admitted claims, realisable value to all creditors was around 178 percent of liquidation value of the corporate debtors, the government in a statement/written answer to a question in Parliament.

IBC came into existence in 2016 to bring make the bad asset resolution process more efficient. There had been debates on reforms to improve efficiency in the backdrop of lower recovery from IBC cases.

The government also said the National Asset Reconstruction Company Limited (NARCL), set up by banks to aggregate and consolidate stressed assets for their subsequent resolution, has acquired one loan so far of Rs. 3,570 crores.

On December 21, Reserve Bank of India (RBI) Governor Shaktikanta Das said the IBC should not be seen as a recovery mechanism, but as a way to bring about resolution in a timely manner.

"IBC should not be seen as a recovery mechanism. It should be seen in proper context. Recovery is important. What is important is to make a timely reference to IBC. What is important now is to identify early stress and address it in a timely manner," Das said at an event in Mumbai.

According to the Economic Survey, 46 percent of Corporate Insolvency Resolution Processes (CIRPs) have ended in orders for liquidation since the inception of IBC.

The survey noted that 5,893 CIRPs had commenced by end-September 2022, of which 67 percent have been closed. Of these, around 21 percent were closed on appeal or reviewed or settled, 19 percent were withdrawn, 46 percent ended in orders for liquidation, and 14 percent resulted in the approval of resolution plans.

According to the Survey, 52 percent of the ongoing CIRPs belonged to industry, and 37 percent to the services sector as of September 2022. Within the industry, 74 percent of the CIRPs were from the manufacturing sector.