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Business Standard
21-05-2025
- Business
- Business Standard
60% resolution plans under IBC approved in last three years: IBBI data
As much as 60 per cent of all resolution plans under Insolvency and Bankruptcy Code (IBC) were approved in the last three years alone, with over 30,000 cases having an underlying default of ₹13.8 trillion getting settled even before admission till December 2024, according to data released by the Insolvency and Bankruptcy Board of India (IBBI). Out of 1,194 Resolution Plans over the last eight years, 708 resolutions were approved in the last three years. The insolvency regulator said that this showed the effectiveness of the legal framework in facilitating the revival of insolvent businesses under IBC. 'The Code has delivered impact far beyond the conventional metric of creditor realisation. By establishing a robust legal framework, the IBC has strengthened credit markets, fostered entrepreneurship, and significantly enhanced India's ease of doing business parameters,' IBBI Chairperson Ravi Mital said in the Board's latest newsletter. Mital said while challenges in IBC persist, including process delays and below-expectation recovery rates, the Code's foundational structure remains sound. The realisation by creditors remains around 32.8 per cent of admitted claims till March 2025, according to IBBI data. 'As implementation matures and jurisprudence evolves, the IBC is well-positioned to overcome these hurdles and fully realise its transformative potential in India's financial ecosystem,' the IBBI chairman said. A study by Indian Institute of Management (IIM), Bangalore, released by IBBI, found a significant reduction in the amount and the number of loan accounts deemed overdue. The study noted that the average time taken for a loan account to transition from 'Overdue' to 'Normal' went down from 248-344 days in 2019-2020 to 30-87 days in 2023-2024. The number of days taken for an account to transition from 'Overdue' to 'Default' reduced from 169-194 days in 2019-20 to 33-81 days in 2023-24. 'Such findings point towards the success of IBC in reducing the time taken to resolve delinquencies on behalf of creditors and debtors in one way or another, indicative of an efficient credit environment,' the study said. The study highlighted that there has been around 50 per cent increase in the average employee expenses in the resolved listed firms in the three years post-resolution. IBBI data showed that more companies are being resolved under the IBC and the number of liquidations is going down. In 2017-18, for every one company resolved, five would go into liquidation. As of March 2025, this has improved to nearly 10 companies being resolved against five going to liquidation.
Mint
21-05-2025
- Business
- Mint
Lenders willing to offer lower rates to distressed firms since IBC took effect, says insolvency board
New Delhi: Creditors have become more willing to lend to distressed firms at lower interest rates since the Insolvency and Bankruptcy Code (IBC) was adopted, showing they are more confident of recovering dues in case of a default, the Insolvency and Bankruptcy Board of India (IBBI) said in its FY25 update on outcomes of debt resolution. The IBC came into force on 1 December 2016. In the update, released on Tuesday, IBBI chairman Ravi Mital cited a study conducted by IIM Bangalore that showed there has been a 3.3% reduction in the cost of debt for distressed firms since the IBC was adopted. Mital termed this an 'improved credit environment for distressed firms". 'A possible explanation could be that distressed firms significantly improved their 'credit channels' while experiencing lower cost of credit in the post-IBC world with respect to their non-distressed counterparts,' said the IIM study, which used data from National E-governance Services Ltd, an information utility set up by leading banks and public institutions. The study did not provide absolute values for total debt or the cost of funds. IBBI said, citing the study, that the bankruptcy code has prompted borrowers to adhere to loan payment schedules. Citing another study, it said in the case of companies that had their distress resolved under the IBC, there was a 50% increase in the average employee cost in the three years after the resolution, indicating its contribution to preserving and adding jobs. The introduction of the IBC has brought a sense of responsibility among promoters of businesses, said Ritesh Kumar Adatiya, director at NPV Insolvency Professionals Pvt. Ltd. 'This also brings comfort to the lender that in case promoters do not behave, they have a very effective tool as deterrence. This additional comfort helps in reducing the risk premium and hence the cost of debt has been reduced a bit," he added. Separately, the IIM study showed that between 2018-20 and 2020-24 there was a significant reduction in the value of overdue loans and the number of loan accounts deemed overdue. There has also been faster resolution of delayed payments, the study said. The proportion of loan accounts transitioning from 'overdue' to 'normal' annually has increased, indicating an improvement in the credit culture of corporations, it said. The average number of days a loan account remains in the 'overdue' category before transitioning to 'normal' has fallen from 248–344 days to 30-87 days. This shows both debtors and creditors are trying to resolve delinquencies at the earliest, IBBI said, citing the study. NeSL data enabled the classification of loans into different categories based on lenders' filings. The study said it offered evidence that the IBC has brought about 'significant behavioural changes in the credit ecosystem', comprising corporations and banks. Credit monitoring has improved, the number of overdue accounts has fallen, and there is a systematic reduction in companies' use of debt, especially long-term debt, it added. 'We also find that there is an increasing tendency to settle debts to avoid corporate insolvency resolution proceedings, which we interpret as a positive sign,' it said. Banks have also been shown to efficiently use the new legal apparatus for debt recovery, either by resolution or by liquidation, the study added.
The Hindu
21-05-2025
- Business
- The Hindu
IBC prompted borrowers to adhere to stipulated payment schedules: IIM-B study
The enactment of Insolvency and Bankruptcy Code (IBC) in 2016 has injected discipline in the credit allocation process and has prompted borrowers to adhere to stipulated payment schedules, said a study by Indian Institute of Management, Bangalore submitted to India's banking regulator Insolvency and Bankruptcy Board of India (IBBI). The study titled Behavioral Impact of IBC uses the National E-Governance Services Limited (NeSL) dataset spanning 2018–2024 on corporate loan accounts which captures periodic filings by creditors on key metrics of loans issued to corporate debtors. NeSL is India's first information utility, set up under the aegis of the IBC. It also incorporate data on corporate insolvency resolution proceedings (CIRPs) from the IBBI dataset for the period 2017–2023, firm-level financial data from CMIE Prowess for the period 2010–2024 and data on non performing assets (NPAs) for banks from Reserve Bank of India for the period 2010–2024. During the period under review, the study notes a significant reduction in loan accounts deemed 'Overdue', both in terms of the Rupee amount as well as in terms of the number of accounts, IBBI Chairman Ravi Mital said in January-March 2025 quarterly newsletter. Similarly, the yearly proportion of transitions of loan accounts from the 'Overdue' category to the 'Normal' category have increased, supporting the view of an improvement in the credit culture of corporates, he said. Even the average number of days that a loan account stays in the 'Overdue' category before transitioning to 'Normal' category has reduced from 248–344 days to 30-87 days. This shows that both debtors and creditors are trying to resolve the delinquencies at the earliest, Mr. Mital added. Shifting control from debtors to creditors, the IBC introduced a time-bound resolution mechanism to streamline bankruptcy proceedings, reduce judicial delays, and improve creditor recoveries, the study said. Thanks to RBI's stringent review of Asset Quality and imposing strict conditions on banks with huge NPAs, the gross NPAs of the scheduled commercial banks have declined from the peak of 11.2% in March 2018 to 2.8% in March 2024. A good part of that reduction is attributable to resolution processes enabled under IBC. The resolution mechanism of IBC found to be effective in addressing the bad loan recovery of bank NPAs, it added. As regards cost of debt, study indicates a 3% reduction in cost of debt for distressed firms post-IBC (vs. non-distressed firms), indicating an improved credit environment for distressed firms, Mr. Mital said in the newsletter. The IBC has had a positive impact on corporate governance. One such finding, as per the study, has been an improved proportion of independent directors on the boards of the companies resolved under IBC, he added.
The Hindu
20-05-2025
- Business
- The Hindu
Creditors realisation stands at over 32.8% till March 2025 under bankruptcy framework: IBBI
Creditors have realised ₹3.89 lakh crore from resolution plans till March 2025, under India's Insolvency and Bankruptcy Code (IBC) enacted in the year 2016. The realisation is more than 32.8% as against the admitted claims and more than 170.1% as against the liquidation value, insolvency regulator Insolvency & Bankruptcy Board of India (IBBI) said in its January-March 2025 quarterly newsletter. Resolution plans on average are yielding 93.41% of fair value of the Corporate Debtors (CDs), it said. More than eight years have passed since the enactment of the IBC in the year 2016. The Code has rescued 1,194 CDs through resolution plans. Further, 1,276 cases have been settled through appeal, review or settlement, and 1,154 cases have been withdrawn under section 12A. The Code has referred 2,758 CDs for liquidation, IBBI said. Till March, 2025, 1,374 CDs have been completely liquidated with submission of the final report. Out of the 1,374 CDs, 878 have been closed. In the closed liquidations, the creditors have realised ₹9,330 crore, which is nearly 90% realisation as against the liquidation value, as per the data. As a result of the behavioural change effectuated by IBC, thousands of debtors are settling their dues before the start of insolvency proceedings, IBBI said. About 30,310 cases having underlying default worth ₹13.78 lakh crore have been settled pre-admission. Post admission, the IBC has resolved 1194 cases through resolution plans, 2,430 cases have been closed through settlement, withdrawals and appeal, and 878 liquidations have closed, it said. In 2017-18, for every 1 CD resolved, 5 CDs would go into liquidation. Steadily, this ratio has now improved to nearly 10 CDs being resolved against 5 CDs going to liquidation, IBBI said. Last 3 years have witnessed an unprecedented surge in the approval of resolution plans under the IBC. In 2024-25, 259 resolution plans were approved, 263 were approved in 2023-24 and 186 plans were approved in 2022-2023. 'While challenges persist, including process delays and recovery rates below expectations, the Code's foundational structure remains sound. As implementation matures and jurisprudence evolves, the IBC is well-positioned to overcome these hurdles and fully realize its transformative potential in India's financial ecosystem,' IBBI Chairman Ravi Mital said in the newsletter.
