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Banks took a haircut of 69 per cent while resolving IBC cases: Report

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For every Rs 100 admitted for the claims under the (IBC), the could realise only 30 per cent of the value. According to a report by Business Line, the latest data till June 30 showed that the took a haircut of Rs 69 for every Rs 100 of admitted claims.

However, this comes down to Rs 17 when it is considered relative to the fair value of the assets, the report added. Haircuts are defined as the losses incurred by creditors ( in this case) on resolving or .

According to data, creditors realised Rs 2.35 trillion in 517 cases. The total value of the claims stood at Rs 7.67 trillion. When compared to the liquidation value of Rs 1.31 trillion, the realisation stands at 179 per cent.

Also Read: Total 1,999 insolvency cases were going on as of June 2022, says govt

Among the top reasons for the large haircuts is the delay in the process of recovery under the . The delay has been attributed to the large number of vacancies in tribunals, incomplete knowledge of the stakeholders, and the piling of cases before the tribunal.

The experts were quoted in the report as saying that a benchmark of the quantum of haircuts needs to be set in the insolvency cases.

“Lenders ideally will always peg the returns from resolution process to the outstanding amount (as opposed to fair value)… it is therefore advisable that this issue be addressed conclusively by amending the regulations to provide a benchmark for the quantum of haircuts in the resolution plan. Any plan which doesn’t comply with the benchmark should be considered ineligible,” Siddhart Srivastava, partner of Restructuring and Insolvency at Khaitan & Co was quoted as saying.

However, some experts stated that the comparison should be made to the liquidation value of the assets and not the claimed value.

“Emphasis must be given to ascertain the resolution value vis-à-vis the liquidation value,” Dinesh Padnekar, partner at Economic Laws Practice told BL.


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