Envisaging A Group Insolvency Mechanism Important, Says Shaktikanta Das
It would be better to formally conceive a framework for issues related to the Insolvency and Bankruptcy Code of India, he said.
It is important to envisage a group insolvency mechanism and lay down appropriate principles through legislative changes, according to Reserve Bank of India Governor Shaktikanta Das.
Referring to possible solutions to issues related to the Insolvency and Bankruptcy Code of India, Das said that it would be better to formally conceive a framework for this.
He was speaking at the two-day Conference of the Centre for Advanced Financial Research and Learning.
Some of the other solutions include realigning the dynamics between the creditors and corporate debtors, reaffirming the financial creditor's role and developing a vibrant secondary market for stressed assets.
"One major impediment for implementing a successful resolution plan has been the absence of a vibrant market for stressed assets in the country," he said.
For this, the RBI Governor suggested that a secondary market in loans can be an important mechanism for the management of credit exposure. The RBI is also in the process of formulating a framework for securitisation of stressed assets.
"...The enactment of the Insolvency and Bankruptcy Code has been a landmark reform in the economic history of India," Das said, while explaining that the law's processes facilitate greater transparency and accountability.
Referring to the positive impact of IBC, Das said that of the 7,058 admitted debtors, 5,057 cases have been closed, and 2,001 corporate debtors are in various stages of resolution.
The data from the Insolvency and Bankruptcy Board of India also shows an increase in the number of resolution plans under IBC, Das said.
However, in order to have a better implementation of the law, it is important to address the problems like the time taken for resolution, he said.
As of September 2023, 67% of the ongoing resolution cases crossed the total timeline of 270 days, including permissible extension, Das said.
And the average time taken for admission of cases stood around 468 days in FY21 and 650 days in FY22, he said.
"Such long degree of delays will substantially erode the value of the assets," Das said.
