IBC recovery rate falls to 32%
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Mumbai: Introduction of a focused bankruptcy law has helped improve the credit culture in India, but the last few years have seen a decline in recoveries and the resolution timelines getting prolonged, Crisil Ratings on Friday.
In a note to observe the seven years of the Insolvency and Bankruptcy Code (IBC), the rating agency said the recovery rates have fallen to 32 per cent in September 2023, from 43 per cent in March 2019. At the same time, the average resolution time has increased from 324 days to 653 days, versus the stipulated 330 days, it said. The IBC has helped in resolving debt worth Rs 3.16 lakh crore stuck in 808 cases in the past seven years, the leading credit rating agency said. Its senior director Mohit Makhija said the IBC is the most potent code in India’s corporate loan history, which has brought a behavioural change in borrowers.
“The fear of losing companies has led to over Rs9 lakh crore of filed debt being settled before the cases arrived at the IBC doorstep for admission. This is around three times the stressed debt resolved via the code in the past seven years, underscoring its deterrence effect,” he said.
