Page 19 - Intl. Review (Draft 1.3)

FEATURED

version for good. The 2014 RBI late Finance Minister Sh. Arun cus IBC has categorically shown
“Framework for Revitalizing Dis- Jaitley, it sought to condense the better results, with loan recover-
tressed Assets in the Economy” wide array of pre-existing legis- ies climbing by over a 1000 bips,
was a comprehensive overhaul lations namely: The Presidency even with a covid-19 freeze in
delineating orderly intrusion in Towns Insolvency Act, 1909; Pro- tow. The IBC then followed up
the somewhat grey areas of the vincial Insolvency Act, 1920; The on their successes, paving the
ARC business. However, the lim- Companies Act, 2013 (Amend- way for the National Compa-
iting nature of later amendments ed), Recovery of Debts Due to nies Law Tribunal (NCLT) to spe-
withing this framework became Banks and Financial Institutions cifically attend and adjudicate
a major stumbling block for the Act, 1993 (Amended) and final- corporate instances of debt
flourishing ARCs. The whole sec- ly the Sick Industrial Companies non-repayment and subsequent
tor witnessing its first slowdown (Special Provisions) Repeal Act, forbearance, sharing the brunt
followed by constrained NPA 2003. Quite the longlist of ex with the overcooked DRTs and
conversion for years to come, all solvency laws. their endless sea of queued cas-
the way until the enigmatic in- This would then enable es - all exigencies one after an-
fusion of the Insolvency & Bank- a sensible recourse for market other - freeing them up to cater
ruptcy Code of 2016. IBC too exits, particularly in an Indian to individual grievances, the do-
was often at odds with SARFAE- landscape where – according main they were undeniably bet-
SI becoming a tripwire for ARC’s to World Bank data – it took on ter suited for from the off. All-in-
smooth functioning, particularly average almost about 4 years to all, a big win for debt resolution
in regards to the debt vs. equity go through the insolvency cycle, and a sparkling prelude for bet-
question. We’ll circle back to the twice that of China, and multi- ter things to come.
particulars of ARCs later down ple times that of the US. Mostly
this analysis. thanks to the countless compli- “The economic roadmap
mentary & supplementary routes towards the handling of
E. Insolvency & Bank- all the way up to 4 separate in- mounting NPAs has been
ruptcy Act, 2016 ter-ministerial avenues for eking a slippery slope. With a
“The king of good times”, out a conclusionary end, with vast array of initiatives
a title encompassing merely parallel procession all the way planned and executed,
5 short words enough to send through, a jungly jangling way. with little to no continu-
pangs of wrath down the spines Statistically that translates ance or accord. The one-
of enraged bankers and avia- nicely into a deep clean-up of off nature of these proj-
tion employees alike. That en- the credit closet. As CRISIL Rat- ects is what’s been the
tire plane-wreck of the Mallya-n ings’ President Gurpreet Ch- sore thumb in economic
debacle was a death knell for hatwal, “The recovery rate for planning, throwing co-
banking complacency on cor- the 94 cases resolved through gency out the window
porate prop-ups & bailouts. But IBC by fiscal 2019 is 43%, com- for momentary redres-
more conclusively, it was the pared with 26.5% through ear- sal, devoid of overarch-
nightmarish wakeup call for the lier mechanisms”. On top of ing themes”.
bankruptcy maze of judicial red which liquidation values have
tape and labyrinthine byzantine also soared to nearly double of 3.1.2. Quantitative/Economic
overlap of antithetically diver- what previous valuations had put Measures
gent legislations, at odds with them to be, under the sole aegis As discussed before, the
itself. of IBC. With resolution times sig- economic roadmap towards the
This was intermingled with nificantly boosted too, albeit not handling of mounting NPAs has
the ongoing discussion of en- exactly optimally progressing, been a slippery slope. With a
acting a comprehensively unify- still with only about 32% of the vast array of initiatives planned
ing code for amending a lengthy over 1,100+ cases outstanding and executed, with little to no
palette of 11 varyingly contradic- having 270 days or more period- continuance or accord. The
tory laws and directives into an icity, tectonically down from the one-off nature of these projects
effective vehicle of delivering 4+ years it used to be not so long is what’s been the sore thumb
swift resolution for liquidated ago (WB Doing Business, 2019). in economic planning, throw-
wind-downs. The brainchild of With a resolution-led fo- ing cogency out the window for

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