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Insolvency & Bankruptcy Code (IBC): The story so far

IBC was enacted in Dec 2016, with the objective of ensuring speedy resolutions of NPAs. It was hailed as one of the most landmark reforms in India. This post is an attempt to understand if this code lived up to its promise.1/9
Till June, 2019, 2162 cases have been admitted. Of these, 174 have been closed on appeal or review or settled; 101 have been withdrawn; 475 have ended in liquidation and 120 received an approval of resolution plans. 1292 cases are pending. 2/9
The 120 closed cases have yielded resolution worth ~Rs. 1,08,070 crore as against total admitted claims of ~Rs. 2,52,577 crore i.e. the recovery rate was 43%. The liquidation value of these assets was merely 23% of the claims. So, IBC yielded a better than expected recovery. 3/9
It is surprising to note that operational creditors (vendors, contractors etc.) trigerred 50% of the cases (by numbers) as against 40% by financial creditors. 4/9
In terms of sectors, almost 41.50% of the cases were from the manufacturing sectors. This was followed by 19.50% cases from Real Estate and 10.50% cases from Construction sectors. 5/9
Approx. 34.50% of the cases have already surpassed the stipulated time limit of 445 days. The average resolution time period is approx. 1 year. This is better than the earlier resolution regimes where the average was 3-4 years. 6/9
Let's take a look at the status of resolution of 12 large accounts that were taken to resolution by banks on RBI's directions. 6 accounts have been resolved with varying degree of haircuts. 7/9
5 out of the remaining 6 accounts have failed to move ahead. There have been failed bids, legal tangles and backouts. 8/9
Despite the relative success of IBC thus far, there is further scope for improvement. Despite IBC, banks have sold nearly Rs 1. 3 lakh crore of bad loans to asset reconstruction companies (ARCs) in last FY. ARCs in comparison provide faster resolution with lesser hurdles. 9/9
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