NEW DELHI: The Insolvency and Bankruptcy Code (IBC), introduced by the PM Modi-led government, is a landmark reform that introduced a legal unified framework for resolving issues of financially-stressed companies, said Finance Minister Nirmala Sitharaman.
In a post on social media platform X, Sitharaman added that the code has played an important role in resolving insolvencies. “The code has brought a paradigm shift in the debtor-creditor relationship and provides a streamlined, one-stop solution for resolving insolvencies”, the finance minister added in the post.
The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December 2015. It was passed by Lok Sabha on May 5, 2016.
Prior to the Insolvency and Bankruptcy Code (IBC) introduced by PM Shri @narendramodi– led Government in 2016, corporate distress proceedings were governed by a patchwork of legislations, which worsened rather than resolving issues.
The need for a modern corporate insolvency… pic.twitter.com/tucS8IFCPG
— Nirmala Sitharaman (Modi Ka Parivar) (@nsitharaman) May 30, 2024
Citing the success of the IBC, she mentioned that World Bank, in its 2019 report, noted that India’s 2016 insolvency regime reform increased creditor recovery rates from 26.5 to 71.6 cents on the dollar, making India ‘by far the best performer in South Asia’ and surpassing even the average recovery rate of Organisation for Economic Co-operation and Development (OECD) high-income economies.
The Finance Minister further mentioned RBI Governor Shaktikanta Das, who recently praised the code saying, “The IBC has fundamentally transformed the credit culture in India, nudging debtors to settle their dues even before the initiation of insolvency proceedings”.
Attacking the Congress-led United Progressive Alliance (UPA), she claimed that the UPA regime purposefully tried to benefit its friends at the expense of the banks and operational creditors.
The IBC has played a key role in helping banks recover from the NPA crisis. According to a report of the RBI, the IBC was the major mechanism for banks to recover stressed assets. The total recovery accounted for for 43 per cent of all stressed assets in 2022-2023.
The central bank highlighted in its report, published in January 2024, that the creditors have realised Rs 3.16 lakh crore out of the admitted claims of Rs 9.92 lakh crore as of September 2023, which works out to a recovery rate of 32 per cent.
Post implementation of IBC, the gross non-performing assets (GNPA) ratio of Scheduled Commercial Banks dipped to a multi-year low of 3 per cent and the net non-performing assets (NNPA) ratio to 0.7 per cent (as of December 2023), she claimed in the post.
The Finance Minister claimed that the industry has developed around 4,400 insolvency professionals and 5,500 registered valuers in a span of 8 years since the IBC’s enactment. (ANI)