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IBC scripts success in just two years; RBI data reveals NPA recovery rate of whopping 50%

Under the IBC, as against the claimed amount of Rs 9.9 lakh crore, lenders have been able to recover Rs 4.9 lakh crore, registering the highest recovery rate when compared to other channels.

Under the IBC, as against the claimed amount of Rs 9.9 lakh crore, lenders have been able to recover Rs 4.9 lakh crore, registering the highest recovery rate when compared to other channels.
Under the IBC, as against the claimed amount of Rs 9.9 lakh crore, lenders have been able to recover Rs 4.9 lakh crore, registering the highest recovery rate when compared to other channels.

The Insolvency and Bankruptcy Code (IBC) has scripted a huge success in just two years by recording a whopping 49.6% recovery rate of non-performing assets (NPAs) in the financial year 2017-18, RBI data showed.

Under the IBC, according to corrected RBI data, as against the claimed amount of Rs 9,900 crore, lenders have been able to recover Rs 4,900 crore, registering the highest recovery rate when compared to other channels.

Earlier, the RBI erroneously mentioned the recovery amount at Rs 4.9 lakh crore on claims of Rs 9.9 lakh crore.

The overall recovery rate, however, has fallen to 13.7% from previous year’s 20.8%, the Trend and Progress of Banking in India 2017-18 report by the RBI showed after correction. Previous data had shown that the overall recovery rate was 41.3%, mainly buoyed by the significant push from the IBC.

Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (also known as the SARFAESI Act), the recovery rate has been 24.8%, followed by 5.4% via debt recovery tribunals (DRTs) and 4% via Lok Adalats.

“Recovery through Lok Adalats and Debt Recovery Tribunals (DRTs) declined alongside the number of cases referred partly indicative of growing clout of the IBC mechanism for resolution of stressed assets,” the central bank said in the report.

“Recovery of stressed assets improved during 2017-18 through the IBC and SARFAESI. Apart from vigorous efforts by banks for speedier recovery, amending the SARFAESI Act to bring in a provision
of three months’ imprisonment in case the borrower does not provide asset details and for the lender to get possession of mortgaged property within 30 days, may have contributed to better recovery,” it added.

In the year 2016-17, the recovery rate had hit a new low of 20.8%, while the average recovery rate between FY2015 and FY2017 was 26.4%. The highest NPA recovery rate of 61.8% was recorded in the year 2009. India’s gross NPA at the end of March 2018 stood at Rs 10 lakh crore, at 11.2% of the total loan advances.

First published on http://www.financialexpress.com on December 28, 2018. The story was updated after the RBI’s correction.

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