IBC has helped banks recover Rs 10 lakh crore stuck in bad debt: RBI Deputy Governor

The Insolvency and Bankruptcy Code (IBC) has played a critical role in improving bank asset quality and facilitating substantial pre-admission settlements of underlying debts of over Rs 10 lakh crore since it was first introduced in 2016, as per RBI Deputy Governor M. Rajeshwar Rao.

Addressing an international conclave, focusing on "Insolvency Resolution: Evolution & Global Perspective" here, Rao stressed the importance of collaborative efforts among stakeholders, with a focus on restructuring and revival, and suggested that detailed studies of IBC cases could provide valuable insights for future lending strategies.

While acknowledging the substantial progress made in cleaning up banks' balance sheets, the Deputy Governor also underscored potential areas of improvement at the conference organised by the Insolvency and Bankruptcy Board of India (IBBI) in association with INSOL India, according to a statement issued by the Ministry of Corporate Affairs on Sunday.

IBBI Chairperson Ravi Mital, in his address, highlighted the versatility and transformative potential of the Code, underscoring its role in dismantling the "defaulters' paradise" through significant behavioural changes in the debtor-creditor ecosystem. He noted the remarkable settlement of over 28,000 cases before admission, while also addressing challenges such as the time-sensitive nature of value preservation.

Emphasising the IBBI's proactive approach, he outlined key regulatory reforms aimed at reducing delays and maximising asset value. He also mentioned about consideration of innovative approaches like mediation, creditor-led resolution processes, and group insolvency mechanisms.

State Bank of India's former Chairman Rajnish Kumar delivered the special address. Drawing from his firsthand experience as SBI Chairman during the initial stages of the IBC, he characterised the IBC as one of the most significant economic reforms, highlighting its transformative impact on the banking ecosystem. He emphasised that the true success of the IBC should not be measured solely by the recovery rate, but by its broader achievements in reshaping the debtor-creditor relationship and enhancing the overall health of the banking sector. He underscored the importance of the Committee of Creditors (CoC) pursuing the larger objective of value maximisation.

INSOL International Technical Director Sonali Abeyratne, in her address, outlined the organization's core functions and recent initiatives. She specifically discussed INSOL International's engagement with INSOL India and emphasised the importance of international collaboration and sharing global best practices in insolvency resolution.

INSOL India President Dinkar Venkatasubramanian, president of INSOL India, delivered a welcome address, tracing the evolutionary journey of the IBC in India, highlighting the Code's significant impact on the insolvency resolution landscape, and also outlining INSOL India's recent initiatives aimed at strengthening the insolvency ecosystem in the country.

SBI Managing Director Rana Ashutosh Kumar Singh, in the keynote address, provided lenders' perspective on the Code, highlighting its phenomenal evolution and significant contribution. Drawing from his international experience in insolvency frameworks, Singh lauded the IBC's transformative impact on bank profits and asset quality. He emphasised the critical need for maintaining bank health as a cornerstone of achieving the vision of Viksit Bharat, and offered constructive suggestions for further improvement.