IBBI Chief Calls for Greater Transparency in Resolving Stressed Assets

Ravi Mital, the head of the Insolvency and Bankruptcy Board of India (IBBI), urged insolvency professionals to enhance transparency and provide more information to stakeholders. He emphasised the need for faster resolution of stressed assets under the insolvency law to improve recovery rates.

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Mital highlighted that no punitive actions would be taken against insolvency resolution professionals for genuine innovations during the resolution process. The Insolvency and Bankruptcy Code (IBC), which aims for a market-linked and time-bound resolution of stressed assets, has returned over Rs 3.4 lakh crore to creditors since its inception in 2016.

Focus on Transparency and Speed

During his speech, Mital stressed the importance of completing the resolution process swiftly and ensuring that assets are sold as going concerns. He noted, "No one gets credit if a firm gets liquidated," urging professionals to improve the quality of information memoranda related to assets under resolution.

Mital also pointed out that being transparent and providing ample information to stakeholders can significantly enhance recovery rates. He mentioned that the current recovery rate is satisfactory but can be improved further with these measures.

Recovery Rates and Innovations

Providing data, Mital stated that around 32 per cent of admitted claims have been recovered under the IBC, with a recovery rate exceeding 80 per cent on a fair value basis. On average, there have been 125 resolutions annually since the IBC's implementation. In 2023-24, approximately 270 resolutions were achieved, and Mital expects this number to increase in 2024-25.

Mital also noted that the IBC has transformed the debtor-creditor relationship. Over 28,000 applications were withdrawn before starting the resolution process, settling underlying debts worth more than Rs 9.5 lakh crore.

International Projects and Accurate Valuation

Mital encouraged Indian insolvency professionals to consider taking up international projects. He made these remarks at the inaugural session of the International Convention on Insolvency Resolution and Valuation organised by ICAI in New Delhi.

At the same event, Ashok Bhushan, Chairperson of the National Company Law Appellate Tribunal (NCLAT), underscored the importance of accurate asset valuation during the resolution process. He stated, "Accurate valuation is highly useful to achieve successful resolution of stressed assets," adding that incorrect valuations pose significant risks.

The IBBI continues to play a crucial role in implementing the IBC effectively. By focusing on transparency, speed, and accurate valuations, insolvency professionals can contribute significantly to improving recovery rates and resolving stressed assets efficiently.