IBC: Banks recover nearly half of Rs.1.43 lakh crore defaulting advances

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In the last two years, banks in India have recovered nearly half of the Rs.1.43 lakh crore defaulting advances stuck in the 82 stressed accounts resolved so far. This indicates that the Insolvency and Bankruptcy Code (IBC) is effective when it comes to recovering funds from bad assets. In these 82 resolved cases, financial creditors made claims worth Rs.1.36 lakh crore and operational creditors made claims worth over Rs.6,371 crore.

IBC

The total number of cases admitted in the National Company Law Tribunal (NCLT) till 26 February 2019 is 1,627. Of these cases, liquidation has been recommended for 345 cases. Nearly one-fifth of these cases have gone for liquidation, whereas the remaining cases are being resolved under the Bankruptcy Code.

Out of the 12 top cases originally identified by the NCLT, four got resolved recently. These four accounts are Bhushan Steel Ltd., Electrosteel Steels Ltd., Amtek Auto Ltd., and Monnet Ispat and Energy Ltd. These four accounts had total claims of Rs.93,021 crore. Of this, Rs.48,117 crore has been realised.

People in the industry believe that the IBC has injected some fear in corporate defaulters in the country. The various restrictions imposed by the IBC makit difficult for these defaulters to continue with their other business operations. Though the IBC is effective in resolving stressed accounts, it can still be improved in the future. Experts believe that the high litigation time associated with process needs to be shortened.

The first major success of IBC was witnessed during the purchase of Bhushan Steel by Tata Steel. This acquisition helped lenders recover over Rs.35,000 crore from this stressed account. Similar debt resolution processes are being undertaken for other accounts with the hope of recovering as much as possible.

Source: Economic Times

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