The Insolvency and Bankruptcy Code (IBC) has turned out to be a big success as the early harvest through IBC process has been ‘extremely successful’, said Finance Minister Arun Jaitley in a blog post Thursday, in which he also provided data related to IBC’s effectiveness in resolving high ratio of NPAs on the books of the banks in the country. Jaitley has listed out the achievements of IBC in the blog post on Facebook as it has completed two years.
So far, NCLT (National Company Law Tribunal) has recorded a total of 1322 cases. At the pre-admission stage, 4452 cases have been disposed; 66 have been resolved after adjudication, and 260 cases have been ordered for liquidation, Arun Jaitley said, adding that in 66 resolution cases, creditors recovered approximately Rs 80,000 crores.
“As per NCLT database, in 4452 cases disposed at a pre-admission stage, the amount apparently settled was around Rs 2.02 lakh crores,” he added. Bhushan Power & Steel Ltd and Essar Steel India are among the 12 big cases which are in advanced stage of resolution and expected to be resolved by the end of this financial year. These cases may realise nearly Rs 70,000 crore, he added.
Further, Jaitley said the rise in the conversion of NPAs into standard accounts and decline in new accounts falling in NPA category show a definite improvement in the lending and borrowing behaviour.
The Insolvency and Bankruptcy Code, 2016 is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December 2015. It was passed by Lok Sabha on 5 May 2016.
The IBC was the quickest Economic legislative change that I have seen being made by Parliament. The NCLT & the IBBI were immediately established, the regulations were framed & by the end of 2016 corporate insolvency cases were being received by the NCLT. An effective governance.
— Arun Jaitley (@arunjaitley) January 3, 2019
“The early harvest through the IBC process has been extremely satisfactory. It has changed the debtor-creditor relationship. The creditor no longer chases the debtor. In fact, it is otherwise. Upon the constitution of the NCLT and the implementation of IBC its functionality had revealed the need for improvements in the law. Two legislative intervention since then have taken place,” Arun Jaitley said.
While explaining rising NPAs on the books of the Indian banks, Jaitley said, “During 2008-2014, Banks lent indiscriminately. This lead to a very high percentage of NPAs which was highlighted by the Asset Quality Reviews of the RBI. This led to prompt action by the Government, appointing an Expert Committee, which in its Report in 2015 recommended the IBC.”