Defaults worth Rs 10.2L cr settled at pre-admission stage of insolvency cases since 2016: Eco Survey

New Delhi: Defaults worth Rs 10.2 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.

Alos, in the past six years since FY18, the IBC (Insolvency & Bankruptcy Code) has enabled over Rs 3 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 Rs 13.9 lakh crore have been disposed of (including pre-admission case disposals) as of March 2024”, said 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 Rs 10.2 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.

As of March 2024, NCLT has facilitated the closure of 4,131 corporate insolvency resolution processes (CIRP).

The Survey said: “3,171 corporate debtors have been rescued, of which 947 cases have been resolved through approved resolution plans, which brought in a realisable value of Rs 3.36 lakh crore.”

“In the resolved cases, the creditors recovered approximately 32 per cent of their claims,” it added.

This amounted to a recovery of 85 per cent of the fair value and 162 per cent of the liquidation value of assets.

Now IBC is the dominant recovery route for SCBs (scheduled commercial banks), the Survey said. Over 3,000 businesses have emerged out of the CIRP, with continued business operations extending the productive use of resources trapped due to financial distress in these corporate debtors.