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New Delhi: Financial Services Secretary Vivek Joshi on Friday said the government has directed heads of public sector banks (PSBs) to conduct a monthly review of the top 20 cases pending in bankruptcy courts.
Such a review will reduce delays in acceptance and resolution of such cases in the bankruptcy court, the official said.
“The entry phase is being delayed,” Joshi told reporters after a review meeting of MDs and CEOs of public sector banks and other state-owned financial institutions, including National Asset Reconstruction Company Limited (NARCL).
The government had called the meeting to review the long pending cases for entry and resolution under IBC and to explore ways to settle the pending cases.
The review had become important because in many IBC cases, it takes more than a year just to get the case admitted to the tribunal, while the resolution process is much longer than the 360-day deadline.
According to official data, public sector banks wrote off Bad debt of Rs 7 trillion in five years between 2019 to 2023. Furthermore, against 6.5 trillion worth of stranded assets, Rs 94,000 crore or just 15% was recovered in 2023, of which more than half the recovered amount came through the IBC route.
The Finance Ministry’s concern over the rising pendency of cases under the IBC comes as the Reserve Bank of India has advocated early disposal of bad loans and recently asked banks to tighten their lending norms and make loans sustainable and To prevent the creation of NPA, instructions were given to avoid any kind of over-enthusiasm. ,
As of September, 2023, out of over 7,058 cases filed in the National Company Law Tribunal (NCLT), 808 cases were resolved under the IBC, while 2,249 cases went into liquidation.
Most of these are hereditary cases.
However, due to the Bankruptcy Code a large number of payment defaults are settled even before they reach the tribunals.
According to the Insolvency and Bankruptcy Board of India (IBBI), more than 26,500 applications involving defaults came to the NCLT till August. 9.3 trillion have been withdrawn.
Meanwhile, Finance Minister Nirmala Sitharaman is also expected to review the work of NARCL soon.
Typically, NARCL functions as a bad bank, aimed at managing and disposing of stressed assets of commercial banks.
Last week, the Finance Ministry informed Parliament that by November 2024, NARCL has acquired Against the original target, public sector banks have bad loans of Rs 11,617 crore. 2 trillion set by the Union Cabinet in September 2021.
“Certain accounts acquired by NARCL are under IBC and recovery is possible only after the resolution plan is approved by NCLAT,” the ministry said.
Thus, in the balance accounts, NARCL has recovered only Rs. 16.64 crore by November 30, 2023.
To clear the pendency of cases, rule maker and regulator IBBI has also said that the country’s debt resolution capacity should be increased by more than three times to handle about 1,000 cases per year.
The expectation is that the number of corporate rescues will increase from around 180 cases last financial year to 300 cases this financial year.
