The Insolvency and Bankruptcy Code (IBC) would be able to resolve 45 per cent of the total bad loans worth Rs 10.2 lakh crore of the top 500 debt-ridden companies by the end of this year, according to rating agency India Ratings and Research.
The rating agency expects that further Rs 4.2 lakh crore worth of stressed loans would become sustainable by the end of 2019, as a result of the resolution achieved through IBC.
The agency says that loans worth Rs 82,000 crore has been resolved so far in 2018 and expects Rs 3.8 lakh crore to be resolved further during the year, taking the total to Rs 4.6 lakh crore.
India Ratings says that going by the success of resolutions so far, it believes the debt resolution turnaround time in India would come down from 4.5 years to 2-2.5 years.
However, the agency raised the concern of delay in resolution in some of the larger cases of NPAs referred to NCLT by the Reserve Bank of India (RBI). It said that of the RBI's first and second lists of 37 cases, only three have been resolved within the stipulated time-frame (first list: 270 days, second list: 180 days).
It further noted that as the process is evolving, the resolution pace is likely to pick up in the next 6-12 months. It believes that "the success of the Insolvency and Bankruptcy Code (IBC) 2016 lies in substantial reduction of the overall resolution time, which is in turn critical for the development of debt capital markets in India."