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Financial institutions set to realise Rs 80,000 crore from IBC in FY20, says Icra

The higher realisation in the current fiscal will be driven by the expected conclusion of CIRP of two large accounts - Essar Steel Limited and Bhushan Steel and Power Limited

twitter-logo PTI        Last Updated: May 8, 2019  | 21:37 IST
Financial institutions set to realise Rs 80,000 crore from IBC in FY20, says Icra

Banks and financial institutions are expected to realise more than Rs 80,000 crore in 2019-20 from the resolution of stressed assets under the Insolvency and Bankruptcy Code (IBC) as compared to Rs 66,000 crore in the previous fiscal, rating agency Icra said in a study.

The higher realisation in the current fiscal will be driven by the expected conclusion of the Corporate Insolvency Resolution Process (CIRP) of two large accounts - Essar Steel Limited and Bhushan Steel and Power Limited, it said.

Both these accounts are part of the RBI's list of the 12 largest defaulting companies announced in June 2017, it added.

Successful completion of the CIRP for these two accounts would bring closure to eight companies from the RBI's list and could help strengthen the confidence in the IBC, despite the significant delays seen in in the process with most of the CIRPs lasting more than 500 days, it said.

"However, despite the hurdles being faced by the IBC, we expect the number of cases being admitted to the National Company Law Tribunal (NCLT) to continue to increase, especially from the operational creditors who are responsible for 50 per cent of all cases admitted by the NCLT," it said.

During the last financial year, cases resolved under the IBC include Electrosteel Steel, Monnet Ispat Ltd and Amtek Auto Ltd.

The progress of the CIRP under the IBC has been hampered over the past two years by the over-burdened NCLTs, innumerable litigations, defiant promoters and failing sectors, it said, adding even then, the process under the IBC has chugged on, albeit at a slower pace than envisioned.

As of March 31, 2019, 715 cases of defaulting corporate debtors had been closed under the IBC. Of the same, a significant portion of corporate debtors (378 cases) was ordered into liquidation, while only 92 CIRPs yielded a resolution plan where the companies continue to operate as going-concerns, it said.

The NCLTs continue to remain heavily burdened as the number of cases being admitted continues to increase quarter-on-quarter with the highest quarterly admissions of 359 cases reported in last quarter of previous fiscal, it said.

As the timelines for the CIRP continue to get stretched, it said, with 32 per cent of the on-going CIRPs as on March 31, 2019, has already crossed the maximum allowed time of 270 days, the number of admitted cases that are yet to be resolved is only increasing.

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