Government should look into the flaws in IBC: SBI Economic Research

According to a report by the Economic Research Department (ERD) of the State Bank of India, the government should look into the loopholes in the IBC (Insolvency and Bankruptcy Code, 2016) to reduce the time taken in the corporate insolvency resolution process.

“Recovery through IBC (of accepted claims) was 32 per cent in FY2014, and financial creditors lost 68 per cent of their claims. According to the ERD report, the time taken to reach the solution is 863 days instead of the reported 330 days.

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average solution time

Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India, said there is a need to critically analyze the fault lines in the IBC set-up, primarily from the timely resolution angle, as the average resolution period has now increased to 863 days. . ,

“This increase in time taken for resolution is in view of the conflicting situations arising from litigation, disagreeing lenders and poor infrastructure, which have hindered this radical, yet largely Can weaken the sense of successful attitude. Also addressing bankruptcy issues,” he said.

“IBC is an important pillar for a vibrant secondary market for stressed assets. “But to grow this market, there is a need to expand the scope of potential solution applicants.”

“In this regard, the launch of the Special Situation Fund (SSF) by SEBI has been a promising start. Going forward, policymakers need to make the regulatory regime on SSFs more attractive for stressed asset investors,” Ghosh said.

ERD hopes that the government will take note of the concerns on IBC so that it can be reformed and cases under the code can be expedited.

Parliament passed IBC in 2016. This Code consolidates and amends in a timely manner the laws relating to restructuring and insolvency resolution of corporate persons, partnership firms and individuals so as to maximize the value of assets of such persons, promote entrepreneurship, availability of credit and Everyone’s interests can be balanced. Stakeholders.