Poor recoveries under IBC can derail Centre's Rs. 70,000-cr recap plan -Radhika Merwin

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published Published on Aug 29, 2019   modified Modified on Aug 29, 2019
-The Hindu Business Line

Barring few cases, large haircuts of 70-90 per cent are continuing to hurt banks

While the Centre’s decision to frontload capital infusion of Rs 70,000 crore into PSBs has boosted sentiment, unless there is quick resolution of large accounts under IBC, this may achieve little. What is of more concern, is the paltry amount that banks have been realising from the resolution of accounts under IBC.

A look at data available on the Insolvency and Bankruptcy Board of India (IBBI) website from the Oct-Dec 2017 quarter (when the first set of resolutions came about), suggests that barring few accounts such as Electrosteel Steels, Bhushan Steel and Binani Cements - where the amount realised by financial creditors as a per cent of their claims has been between 40-100 per cent - the average recoveries in other cases has been poor at 20-25 per cent. This has meant huge haircuts for banks, accentuating the problem of excessive delays.

The data put out by IBBI pertains to cases where the resolution plan has been approved by the CoC (Committee of Creditors). These may not have translated to actual recoveries for banks as many of the cases have been stuck in endless litigations or even ended up in litigation subsequently.

Of the two list of accounts that the RBI had referred to IBC for resolution - constituting about half of the bad loans in the system - only in a handful of cases such as Bhushan Steel, Monnet Ispat and Electrosteel Steels, banks have actually recovered some amount. In others, while the CoC may have approved the resolution plan, cases are still stuck in litigations. Bhushan Power & Steel, Essar Steel and Alok Industries - are a case in point.

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The Hindu Business Line, 28 August, 2019, https://www.thehindubusinessline.com/money-and-banking/poor-recoveries-under-ibc-can-derail-centres-70000-cr-recap-plan/article29277689.ece?homepage=true&


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