Impossible to accept 95% haircuts for banks under IBC: FM

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Last Updated03/10/2022

Indian Finance Minister recently said that it is unacceptable that banks should take a hefty haircut on loans that go through the resolution process under the Insolvency and Bankruptcy Code (IBC).
Also called for greater efforts from resolution professionals (RPs) to avoid fingers being pointed at such deals.

Enacted in 2016, against the backdrop of mounting non-performing loans, with a view to establishing a consolidated framework for insolvency resolution of corporations, partnership firms and individuals in a time-bound manner
Companies have to complete the entire insolvency exercise within 180 days under IBC and the deadline may be extended if the creditors do not raise objections to the extension.
It seeks to tackle the non-performing asset (NPA) problem in two ways.
Behavioural change on part of the debtors to ensure sound business decision-making and prevent business failures is encouraged.
It envisages a process through which financially ailing corporate entities are put through a rehabilitation process and brought back up on their feet.
The IBC sets out three classes of persons who can trigger the corporate insolvency resolution process (CIRP) – financial creditors, operational creditors and corporate debtors.
The most important aspect under the IBC is the timeliness of insolvency resolution.
The Supreme Court in Kridhan Infrastructure Vs Venketesan Sankaranarayan, observed that the insolvency resolution should not suffer from an indefinite delay in complete abeyance of the timelines fixed under the IBC.