Timely rescue of firms pushes IBC recovery to 49%
Creditors have been able to recover nearly half their claims under the Insolvency and Bankruptcy Code (IBC) when the resolution has been completed within the 330-day deadline but delays lowered the proportion of money they got back. Creditors recovered as much as 49% of claims when the IBC process was finished on time but this dropped to 26% when it took 600 days or more, according to Insolvency and Bankruptcy Board of India (IBBI) data. The IBC was introduced eight years ago, in May 2016.
The latest data by the bankruptcy regulator establishes the cost of delays in insolvency resolution, going beyond anecdotal evidence. Insolvency resolution holdups, caused mainly by litigation, have been the IBC's gravest challenge, experts said. They called on the government to address this in amendments to the IBC--introduced in May 2016--that are expected to be made once the next government is in place. The IBC by itself isn't a recovery tool but a law that facilitates the market-driven resolution of stressed firms. However, recoveries through this route have often been flagged to gauge its efficacy.
The resolution of 947 stressed companies under the IBC over these years has fetched creditors ₹3.36 lakh crore, or 32.1% of claims. A company's insolvency resolution takes an average 679 days, pointing to the scourge of delays.
Timely resolution in each case-within 330 days as per the IBC, including time spent on litigation--could have prevented asset value erosion and sharply raised recovery prospects. As of March 2024,
