Creditors recovered ₹3.36 trillion under IBC: Nirmala Sitharaman

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₹3.36 trillion owed by defaulting corporations under the Insolvency and Bankruptcy Code since 2016 when the bankruptcy reform was introduced, finance and corporate affairs minister Nirmala Sitharaman said on Thursday.The minister said in a social media post that the recovery, a significant improvement over the previous regime—the Board for Industrial and Financial Reconstruction (BIFR)—represents around a third of what was claimed by creditors and 162% of the liquidation value of the assets. The BIFR regime achieved debt resolution of fewer than 3,500 cases in the nearly 30 years since its inception in 1987 whereas IBC has rescued 3,171 distressed companies between 2016 and March 2024 and helped shut down unviable businesses, the minister said in the post.

IBC is counted as one of the transformative reforms of the first term of the NDA administration although the work on bankruptcy reform had started before. It has helped in tackling a major development challenge for the government—the twin balance sheet problem – when banks are stressed and firms are overleveraged, due to liberal lending practices meant to boost economic growth after the global financial crisis of 2008-09.IBC has built trust and transparency in the financial system and as per an RBI report, accounted far for the greatest recovery among different recovery channels in FY23, the minister said.