Ahead of the Union Budget on Thursday, while the government seems to be reposing a lot of faith in the Insolvency and Bankruptcy Code to tackle the issue of non-performing assets the Economic Survey 2017-18 shows a low success rate of recovering only one-third of loans. The Indian Express reported that financial creditors were able to recover 33.53 per cent of total claims outstanding from the defaulting borrowers. The financial creditors were able to recover Rs 1,854.40 crore out of the total claims of Rs 5,530.30 crore.
The companies involved in the recovery process include Synergies Doorey Automotive, Shree Metalik, Kamineni Steel & Power India, Shirdi Industries, among others. Synergies Doorey had the lowest recovery rate of 6 per cent in which financial creditors could recover only Rs 54.7 crore out of total claims of Rs 972.2 crore. In the case of Prowess International Pvt Ltd, financial creditors recovered 100 per cent of the outstanding claims of Rs 3.4 crore, the Survey data shows.
Claims worth Rs 3.13 lakh crore, mostly related to 11 defaulting companies notified by the Reserve Bank, are under insolvency proceedings, the pre-budget Economic Survey said. The Economic Survey 2017-18, tabled by Finance Minister Arun Jaitley in Parliament, further said that of the 11 companies under the Corporate Insolvency Resolution Process (CIRP), most are either seeking extension or have already been granted additional time. Era Infra Engineering Ltd is the only company which is yet to be admitted to the Corporate Insolvency Resolution Process (CIRP) under the IBC. The Code provides for a time-bound resolution within 180 days, with a provision to extend the deadline by another 90 days.
The recovery rate for the 10 cases under the IBC for which resolution has been approved is better than overall rate recorded for the banks, though these are early days for the bankruptcy law and the large cases of default are yet to be resolved.
Meanwhile, according to The Economic Survey, the number of companies facing liquidation under the Insolvency and Bankruptcy Code (IBC) is thrice that of companies where a resolution plan has been approved. According to the Survey, of the 525 insolvency petitions filed in the National Company Law Tribunal (NCLT), 30 companies have been ordered to be liquidated, 10 companies have got their resolution plans approved, 34 have been closed by appeal or review and 451 companies are still undergoing the process. In terms of the quantum of loans involved for companies under the insolvency process, the steel sector tops the list with Rs 57,000 crore of debt, followed by retail at Rs 12,719 crore.