Recovery by financial creditors has seen a significant rise after the Insolvency and Bankruptcy Code (IBC) kicked in compared with the previous recovery regimes like Debt Recovery Tribunal, Lok Adalat and SARFAESI Act, the Economic Survey for 2018-19 pointed out.
Between 2007 and 2017, recovery from all those other sources was 23% while the same was 43% under the IBC between 2017-19. “These earlier mechanisms have resulted in an average recovery of 23% to lenders as against nearly 43% under the IBC,” the Survey said. The overall recovery in resolved cases is nearly ₹74,497 crore for the financial creditors, which is 194% of the liquidation value.
The IBC was introduced to tackle the stressed asset problem of banks that almost touched close to ₹13 lakh crore by the end of March 2018. The financial creditors have been provided with greater role and powers through the committee of creditors under the IBC process.
The Survey further noted that the IBC had made a significant impact on the way the default of debts is viewed and treated by promoters and management.
“It has initiated a cultural shift in the dynamics between lender and borrower, promoter and creditor,” it added.