As insolvency resolutions of large cases including Essar Steel and Bhushan Power are expected to speed up, recoveries from banks and financial institutions may improve under the Insolvency and Bankruptcy Code (IBC) in 2019. Of the total claims of Rs 1,26,303 crore, the creditors could recover Rs 58,385.23 crore on the cases that were successfully resolved under IBC, data analysed by The Indian Express showed.
However, the analysed data doesn’t include the insolvency cases for which liquidation orders have already been passed as it’s difficult to evaluate the recovery made in these cases until their completion.
As amounts recovered in liquidation is much lesser than where IBC resolution could be implemented, the average recovery to be made is likely to be lower in comparison to the cases that were resolved successfully, industry people told The Indian Express. While 212 IBC cases were resolved, only resolution plan was approved in just 50 cases at end of September.
Bhushan Steel, Electrosteel Steel, Amtek Auto, Monnet Ispat and Energy, are the largest cases resolved under the IBC that account for about Rs 93,000 crore worth of total claims made by the creditors.
However, these two challenges still remain: large number of cases being referred to NCLT, and violation of the resolution time-limit in many cases.
“The two major challenges facing the NCLT process are clogged pipelines and the unsuitability of the method for some classes of stressed assets, especially power and small and medium enterprises. At current clearance rates, resolving the whole NPA problem could take another six years or so,” Former Chief Economic Adviser Arvind Subramanian wrote in recent his book ‘Of Counsel: The Challenges of Modi-Jaitley Economy’.
Source: Financial Express, December 26,2018