Bankers have so far taken a hair cut of 60% in total in all the cases that have been resolved through the Insolvency and Bankruptcy Code (IBC) as of 31 March 2021.
According to data released by the insolvency regulator -- the Insolvency and Bankruptcy Board of India (IBBI) – banks and other financial institutions recovered a total of Rs 2 lakh crore from 348 cases of insolvencies which were successfully resolved as of 31 March 2021. The total claims made by banks in these cases were Rs 5.16 lakh crore.
In the January-March 2021 quarter, 29 insolvency cases were successfully resolved, with creditors recovering Rs 4,600 core out of a total claim of Rs 17,389 crore made by bankers. The recovery rate during the quarter was a paltry 26.41%.
During the same quarter, 149 companies undergoing insolvency proceedings have been ordered to be liquidated after these firms failed to get any viable resolution plans. So far 1,277 of the total 4376 companies undergoing insolvency proceedings have been liquidated.
Experts have continuously raised concern over high percentage of liquidation and ever declining recovery rates from the insolvency process. It is to be noted that before the implementation of IBC, the average recovery rate for bankers from the previous regime of default resolution processes was 26% and the average time for closure of a case was 4 years.
This is the fifth year of IBC, and despite all the amendments and path-breaking judgments by different courts to settle contentious issues, delays and low recovery continues to mar the overall IBC regime. The average time taken to resolve the cases is 459 days much more than the stipulated 330 days.
Though, one positive of IBC is that the fear of losing control of the company forces many promoters to resolve their issues with creditors even before admission of the case into NCLT. For example, 17,305 applications for initiation of insolvency proceedings against defaulting firms having underlying default of Rs 5.33 lakh crore were resolved even before their admission.