Banks take 67% haircut in 1,194 insolvency cases yielding resolution
Lenders have recovered Rs 3.89 lakh crore against admitted claims of Rs 12 lakh crore through resolution plans under the Corporate Insolvency Resolution Process (CIRP) till March 2025, resulting in a recovery rate of 33%. This means on average bankers have taken a haircut of 67% from CIRPs which yielded in resolution. However, the recovery is 163% of the total liquidation value (Rs 2.30 lakh crore) of the companies which got resolved through insolvency resolution process.
The total number of insolvency cases yielding resolution plans rose to 1,194 by March 2025, up from 947 in FY2023-24. At the end of FY24, the total recovery was to the tune of Rs 3.36 lakh crore.
Of the 1,194 cases, lenders in 172 cases had admitted claims exceeding Rs 1,000 crore. While these large corporate debtors owed creditors Rs 10.24 lakh crore, the fair value of their assets at the time of entering CIRP was only Rs 1.95 lakh crore. Creditors in these cases realised 33.89% of their admitted claims, but 177.61% of the liquidation value.
While a 67% haircut raises serious question over the efficacy of the IBC, the insolvency regulator – Insolvency and Bankruptcy Board of India (IBBI) – has says that the recovery amount does not account for potential future recoveries such as proceeds from personal and corporate guarantees, equity value, or avoidance transaction recoveries.
It further says that significant portion of resolved case (40%) were previously defunct or with the erstwhile Board for Industrial and Financial Reconstruction (BIFR). In these cases, claimants realised just 19.03% of their admitted claims, though they achieved 151.92% of the liquidation value.
On the liquidation front, 2,758 cases ended in liquidation as of March 2025. Of the total cases, 214 involved admitted claims exceeding Rs 1,000 crore, but had asset values of merely Rs 0.46 lakh crore, according to IBBI newsletter. Around 78% of all liquidated CIRPs were either BIFR cases or defunct entities, where the average asset value was only 6% of the outstanding debt.
Meanwhile, IBBI chairman Ravi Mittal has reiterated the importance of IBC in resolving NPA cases. He cites an RBI Report, which showed that the IBC had emerged as the dominant recovery route for banks, accounting for 48% of all recoveries made by them. He further says cost of debt for distressed firms have come down by 3% post-IBC (vs non-distressed firms), indicating an improved credit environment for distressed firms.
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