IBC Recovered Rs 3.36 Tn From Defaulting Corporations Since 2016

New Delhi, May 31 (KNN) According to Union Minister for Finance and Corporate Affairs Nirmala Sitharaman, creditors have recovered a significant Rs 3.36 trillion owed by defaulting corporations since the implementation of the Insolvency and Bankruptcy Code (IBC) in 2016.

This recovery amount represents approximately one-third of the total claims made by creditors and 162 per cent of the liquidation value of the assets involved.

In her statement on Thursday, the minister highlighted the IBC's remarkable improvement over the previous debt resolution mechanism, the Board for Industrial and Financial Reconstruction (BIFR).

While the BIFR resolved fewer than 3,500 cases in its nearly 30-year tenure since its inception in 1987, the IBC has successfully rescued 3,171 distressed companies and facilitated the closure of unviable businesses between 2016 and March 2024.

The IBC is widely regarded as one of the transformative reforms introduced during the first term of the NDA administration, although the groundwork for bankruptcy reform had commenced earlier.

It has played a crucial role in addressing the twin balance sheet problem, a major developmental challenge faced by the government, which arose due to stressed banks and overleveraged firms resulting from liberal lending practices aimed at boosting economic growth in the aftermath of the 2008-09 global financial crisis.

According to the minister, the IBC has fostered trust and transparency in the financial system, and a Reserve Bank of India report indicates that it accounted for the highest recovery among various recovery channels in the fiscal year 2023.

Consequently, the gross non-performing assets ratio of banks has declined to a multi-year low of 3 per cent, while the net non-performing assets ratio, which excludes provisions for potential losses, has reached 0.7 per cent as of December 2023.

Sitharaman emphasised that the IBC has brought about a paradigm shift in the debtor-creditor relationship, providing a streamlined, one-stop solution for resolving insolvencies.

She referred to a 2019 World Bank report acknowledging an increase in the recovery rate under the new regime.

(KNN Bureau)