Image Source: The Economic Times
India's insolvency ecosystem is going through a paradigm change with over 30,000 cases, worth an unprecedented ₹13.78 lakh crore in defaults, being resolved prior to formal admission under the Insolvency and Bankruptcy Code (IBC) through December 2024. The achievement, flagged by Jitesh John, Executive Director of the Insolvency and Bankruptcy Board of India (IBBI), reflects the increasing contribution of IBC in inducing credit discipline and timely action on the part of debtors.
Major Highlights
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30,310 cases were pre-admission settled, which points towards a massive turnaround in credit discipline and the behavior of the debtors.
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The timely settlements accounted for defaults worth ₹13.78 lakh crore and speak volumes of the deterrent aspect of IBC and its strength in promoting out-of-court resolutions.
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The Reserve Bank of India's latest report indicates that of ₹96,000 crore recovered by scheduled commercial banks from various sources, almost half-₹46,000 crore-was through IBC, affirming its pivotal position in debt recovery.
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1,194 Corporate Insolvency Resolution Processes (CIRPs) have been concluded since inception in resolution by March 2025, leading to ₹3.89 lakh crore realized for creditors-about 32% of total claims.
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Creditors have recovered 170% of the liquidation value and 93.36% of the fair value via resolution plans with strong recovery rates.
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Interestingly, 40% of resolved CIRPs were of non-existent companies, many of which got revived, leading to creation of jobs and economic activity.
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After resolution, resolved companies recorded a 50% increase in aggregate assets, a 130% increase in capital expenditure, and their market valuation increased threefold from ₹2 lakh crore to ₹6 lakh crore.
Experts at the CII Annual Conference on IBC recently suggested using AI and blockchain to further automate insolvency procedures and increase transparency.
The framework of the IBC is turning out to be pivotal in tilting the power balance in favor of creditors, promoting early settlements, and reviving troubled companies, ushering in a new era for India's financial system.
Source: Business Standard, The Sunday Guardian, Economic Times, Millennium Post, PTI
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