The Insolvency and Bankruptcy Code (IBC) was enacted to help banks pursue the recovery efforts in a time-bound manner and promote credit discipline in the banking industry.

While some metal cases have yielded healthy recoveries, a few accounts have been under continuous litigation, delaying the resolution process.

The recovery rate under the IBC for cases that have undergone resolution stands at ~37% (180% of the liquidation value).

With PSU banks having high exposure toward NCLT cases and other set of accounts in which ICA is signed/likely to be signed, the asset quality recovery cycle for corporate banks is closely linked to the efficacy of the IBC framework.

Key Insights:

  1. 2,542 cases referred to NCLT; only ~40% from financial creditors
  2. Only 15% cases resolved; activity has picked up though
  3. Manufacturing, real estate and construction form ~70% of admitted cases
  4. Average time for resolution at ~370 days; ~296 days for liquidation
  5. Status of pending cases: ~36% breach the 270-day timeline

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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