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Modi government's masterstroke IBC and its report card: Here's what experts say

Updated : May 08, 2019 09:13 PM IST

The Insolvency and Bankruptcy Code (IBC) was passed in 2016. In record time the government set up the entire ecosystem comprising the adjudicating authorities namely the NCLTs and NCLATs, The Insolvency & Bankruptcy Board of India ensured the registering of insolvency professionals and valuers.

As of March 31, 2019, 1,858 cases have been admitted, of which, 152 have been settled, 91 have been withdrawn, 94 have been completely resolved,  378 companies went into liquidation and 1,143 are yet to be resolved.

Of the 1.73 lakh crore of claims made by creditors so far, they have realised 43 percent of the amount. This is double what they would have got if they went for liquidation.

The IBC law requires that all cases be resolved in 180 days, extendable to 270 days. Unfortunately, as many as 362 cases are pending well past their 270-day mark. Among these is the infamous Essar Steel. 186 cases are at the moment in the 180-270 day bracket and 247 in the 90-180 day bracket.

Before the IBC was born, in India non-performing assets (NPAs) or defaulting companies on an average took six years to be resolved and banks barely recovered 22 percent of their money. Post IBC, cases are taking 310 days and the realisation is close to 45 percent of the money stuck.

“Insolvency and Bankruptcy Board of India (IBBI) took some innovative ways of bringing that set of professionals on the table... before IBBI was set-up, the government set-up four working groups to develop the rules and regulations which was at a certain stage when IBBI was set-up and it took those draft rules and regulations and then finalised it. So that way government prepared the entire ecosystem including a regulatory framework and it ensured that the transactions commenced on December 1 and it happened," MS Sahoo, chairman, Insolvency & Bankruptcy Board, told CNBC-TV18 on Wednesday.

"IBC this time has gone way beyond any of our expectations. If you asked any of us 2.5 years ago, would we be where we are today? I do not think even the most optimistic of us would have thought of where we are. We completed the task from scratch, a new law, setting up all the pillars to make the law functional, faster than Singapore, Europe," said Bahram Vakil, insolvency expert, AZB & Partners.

He added, "In 310 days the recovery is very close to 50 percent. State Bank of India which has a huge chunk of the NPAs is very close to 60 percent, I think it is 58 percent. So, we have made huge strides. We still have a long way to go but if we keep up this pace, I am extremely optimistic."

The recovery after IBC was 43 percent compared to 22 percent before the IBC as per MS Sahoo’s latest newsletters.

Speaking about the recovery, MS Sahoo said, “That is the data as on March 31, 2019. There has been some improvement in April, however, this does not take in to account the ArcelorMittal-Essar matter. That alone will push-up this percentage."
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