Companies that go to insolvency are not expected to exceed recovery rates by more than 30 percent

Mumbai, Ta. 20 February 2020, Thursday

After resolving large-scale insolvency cases, such as Essar and Bhushan Steel, bankers are no longer expecting the recovery rate to be more than 3-5 per cent from companies in insolvency cases.

As of December 1, the financial creditors had received Rs 5.5 trillion under six resolution plans, which would amount to 8.5 per cent of the total filed claim of Rs 1.8 trillion, said the Insolvency and Bankership Board of India (IB). Statistics say.

Of the total amount received, about one trillion rupees has been received from four steel companies. However, bankers do not expect recovery rates to be particularly high under IBC cases.

The second list of cases issued by the Reserve Bank for IBC does not appear to have a recovery of more than 5% in cases under the second list, a banker said.

The government has enacted a good law, but the enthusiasm that is being implemented is not right at present. In some cases, the resolution amount is less than 5% of the claim amount, the banker said. In some cases, the amount has been found to be only 1%.

We prefer IBC more in dealing with underperforming companies because the solution process is very transparent. The lending culture has improved due to IBC. In the old cases, there is a significant drop in value because of the asset asset, another banker said.

In earlier practices, the promoters were taking advantage of the loopholes in the law and pulling out widespread deadlines that would not be possible soon enough at IBC, and the time consuming would only do more harm to the companies. As of December 3, the 3 ongoing corporate insolvency resolution processes had exceeded the 3-day timeframe in 6 cases.