Page 37 - Banking Finance May 2023

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Corporate Insolvency Resolution Process (CIRP):
Since the inception of the Insolvency and Bankruptcy Code
(IBC) in December 2016, 5,893 CIRPs had commenced by
end-September 2022, of which 67 per cent have been closed.
Of these, around 21 per cent were closed on appeal or
review or settled, 19 per cent were withdrawn, 46 per cent
ended in orders for liquidation and 14 per cent culminated
in approval of resolution plans). Till September 30, 2022, 553
CIRPs have ended in resolution. Where the processes were
initiated under section 7 of the Code, realisation by financial
creditors (FCs) under resolution plans in comparison to
liquidation value was 201 per cent while the realisation by
them was 33 per cent of their claims. 46 per cent of the
closed CIRPs yielded orders for liquidation, as compared to reducing regulatory costs, driving digitalisation, improving
14 per cent ending up with a resolution plan. customer protection and access to finance. Regulators
remain alert to the rapidly changing financial ecosystem
However, more than 76 per cent of the CIRPs ending in with a view to enhancing its efficiency and ensuring its
liquidation (1349 out of 1774 for which data are available) soundness and stability. The right policy trade-offs, in
were earlier with the Board for Industrial and Financial emerging markets like India, is the need of hour and the
Reconstruction (BIFR) and/ or are defunct. The economic central bank when designing regulation and supervision for
value of most of the corporate debtors that ended in the banking sector must address all tough challenges to
liquidation had almost completely eroded even before they ensure a sustainable growth.
were admitted into CIRP. These CDs had assets, on an
average, valued at less than 8 per cent of the outstanding There is evidence that the economic reforms undertaken
debt amount.53 per cent of CIRPs initiated by operational since 2008 have provided many wide-spread benefits. This
creditors (OCs) were closed on appeal, review, or includes macroeconomic benefits that have resulted in more
withdrawal. Such closures accounted for about 72 per cent stable economic growth and restrained inflation. It also
of all closures by appeal, review, or withdrawal. There is a includes microeconomic benefits that have resulted in a
need for more prompt action through identification and filing greater amount of choice for consumers, lower prices and
of accounts so that resolution process may result in sufficient improved quality of services. Every reform brings visible
value for the stakeholders. changes in the sectors for which it is targeted but such an
impact cannot be isolated only to that segment of economy.
Conclusion
Financial sector regulation involves continuous assessment No matter how relevant the present policies of a bank are,
of risks with pro-active policy responses. In the current we must study the possible impact of such reforms on our
challenging global environment, regulatory efforts are working to ensure continuous improvement. The disguised
focused on addressing vulnerabilities in non-bank financial impact of economic reform needs to be recognized and
intermediation and core segments of financial markets. arrangements to assist transition can be an important part
Protecting the financial system from the ill effects of climate of policy design. A reform is always for betterment of
risk is a major policy goal for regulators. The increasing prevailing conditions, and we have to be adaptive to such
threat of cyber risk is another key focus area for regulators, changes so that banks remain in good shape in the marathon
given its potential to increase vulnerabilities at institutional of economic development and the public money is safely and
and system levels. Domestically, the goal is to safeguard the profitably deployed.
domestic financial system from internal and external shocks
while protecting customers and preserving financial stability. Reference:
1. Financial Stability Report, December 2022, RBI
In this context, regulatory measures are aimed at improving 2. www.bis.org/bcbs
the resilience of financial intermediaries, easing compliance, 3. University of Maryland CISSM Cyber Attacks Database.

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