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Banks take 57% haircut in 94 cases worth Rs 1.75 lakh crore in FY19

BusinessToday.In     May 3, 2019

Banks realised less than half of admitted claims in cases resolved during the last financial year, according to industry bodies. The lenders took a huge 57 per cent haircut in 94 large accounts worth 1.75 lakh crore which was resolved in FY 2018-19. They managed to recover only Rs 75,000 crore, which amounts to only 43 per cent of the admitted claims. These numbers come as the Insolvency and Bankruptcy Code (IBC) enters its third year.

"Only 94 stressed with a total claim of Rs 1,75,000 crore by financial creditors were resolved in FY19 with a recovery of Rs 75,000 crore or 43 per cent of the admitted claims under the insolvency process approved by the various national company law tribunals (NCLTs)," a joint study by rating agency CRISIL and trade organisation ASSOCHAM said.

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The average resolution timeline for these 94 cases was 324 days as against the stipulated timeline of 270 days. The report pointed out that liquidating these 94 companies would have realised only 22 per cent of the admitted claims, which is significantly lower than the recoveries made from the normal resolution process.

By the end of March, there were 1,143 cases pending at various bankruptcy tribunals. Around 32 per cent of these cases were pending for more than 270 days. The CRISIL-ASSOCHAM report further said there are a few big-ticket accounts for which resolution has not been finalised for over 400 days as IBC framework is still a work in progress.

According to the study, some of the key issues that need to be addressed for successful implementation of IBC are adherence to timelines, adequate judicial infrastructure, creditor classification and prioritising, among others.

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To maximise value and stakeholders' interest, the IBC framework for liquidation under a going concern basis needs to be explored further and should be followed in the true spirit, the report said.

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