Creditors recovered 32% of their claims

New Delhi: Defaults worth Rs10.2 lakh crore have been settled at the stage of pre-admission of insolvency cases since the inception of IBC in 2016, and more than one-fifth of the companies undergoing resolution process are from the real estate space, the Economic Survey said on Monday.

In the past six years since FY18, the IBC (Insolvency & Bankruptcy Code) has enabled over Rs3 lakh crore recovery for banks, which was much more than what the lenders had recovered through previous mechanisms of Lok Adalats, DRTs, and the SARFAESI Act, it said.

Since the implementation of IBC in 2016, a total of 31,394 corporate debtors cases involving a value of Rs13.9 lakh crore have been disposed of (including pre-admission case disposals) as of March 2024, says the Survey tabled in Parliament by Finance Minister Nirmala Sitharaman.

The loss of control immediately after the beginning of the resolution process has led debtors settle with creditors as soon as the applications are filed with the National Company Law Tribunal (NCLT).

“A singularly notable fact is that Rs10.2 lakh crore of underlying defaults were addressed at the pre-admission stage. This change in debtor behaviour has been a big boon for banks and other lending institutions,” it said, adding the government has taken several measures to improve the insolvency ecosystem.

The IBC has created an ‘optimal incentive-disincentive mix’ to facilitate above-board and transparent dealings in creditor-debtor relations, it said. As of March 2024, over 1,500 real estate companies were admitted to the insolvency resolution process under the IBC, accounting for a 21 per cent of total admissions, said the Economic Survey.

“One in four cases settled after admission was also from this sector. Of the 891 corporate debtors resolved, 133 were real estate companies, forming 15 per cent of the companies resolved,” it said.