The Insolvency and Bankruptcy Code (IBC) was the best measure for Scheduled Commercial Banks to recover bad loans in FY23, according to the latest edition of the Economic Survey.
As many as 5,893 Corporate Insolvency Resolution Processes (CIRPs) had commenced by end-September 2022, of which 67 per cent have been closed, under the Insolvency and Bankruptcy Code (IBC) that came into effect in December 2016.
Over half of the CIRPs ongoing as of September 2022 belonged to the industries sector, followed by 37% in the services sector. In the services sector, 60% of the ongoing CIRPs belong to real estate, renting, and business activities, the survey noted.
Citing Reserve Bank of India (RBI) data, the Economic Survey 2022-23 said that in FY22, the total amount recovered by Scheduled Commercial Banks (SCBs) under the Code was the highest compared to other channels.
“One of the far-reaching spillover effects of the Code has been the behavioural change effectuated by it among debtors. The fear of losing control over the CD upon initiation of CIRP has nudged thousands of debtors to settle their dues even before the initiation of insolvency proceedings. “Until September 30 2022, 23,417 applications for initiation of CIRPs of CDs (Corporate Debtors) having underlying default of Rs 7.3 lakh crore were disposed of before their admission into CIRP,” the Survey said.
According to the survey, the resilience of the domestic financial system is reflected in the healthy balance sheet of banks, stronger capital levels of NBFCs (Non-Banking Financial Companies) and robust growth in the AUM (Assets Under Management) of domestic mutual funds.
“Buoyant demand for bank credit and early signs of a revival in the investment cycle are benefiting from improving asset quality, a return to profitability and resilient capital and liquidity buffers. Further, IBC mechanism continues to support the ‘Ease of Doing Business’ in India by facilitating easy exit with time bound resolutions for firms” the Survey opined
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