The average time taken for resolution under the Insolvency & Bankruptcy Code (IBC) continues to rise and is now at a three year high, India Ratings & Research (Ind-Ra) said.
Data released by the Insolvency and Bankruptcy Board of India (IBBI) June 2023 newsletter indicates that the average time taken for a corporate insolvency resolution process (CIRP) has increased further and stands at 635 days for operational creditors (OCs) and 643 days for financial creditors (FCs), above the 270 day limit set by law.
This delay has further worsened from a year ago when realisations for both OCs and FCs took around 550 days.
Delays during the resolution process have hurt the recovery prospects for creditors with over 65% of the ongoing corporate insolvency resolution cases have been continuing for more than 270 days as on June 30.
Consequently, the share of ongoing cases under CIRP for 90 days and below was at a three-year low of just 10% as of June 2023.
However, the gap between admission and closure of IBC cases reduced with 238 cases admitted and 198 closed during the first quarter of fiscal 2024 compared to 332 cased admitted and 156 closed a year ago, reflecting the slowing pace of new cases as banks’ asset quality has improved.
In all, a total of 6,815 cases were admitted of which 2073 are still undergoing the resolution process.
Financial creditors though have seen a slight improvement in realisation year on year with 34% recovery in the first quarter of the current fiscal compared to 32.7% a year ago. Though realisations have been falling for financial creditors in the last three years.
“The realisation of OCs has been the highest compared to the past three years, while for FCs it has been much lower than the realisations achieved during FY21-FY22. IBBI in its current newsletter has provided a break-up of the realisations achieved by financial services provides which stands at 42.6% from the one case resolved during 1QFY24,” Ind-Ra said.
