Banks recover dues worth Rs. 83,000cr from 2,100 companies
Thousands of companies have started paying back their dues to banks and other lenders for fear of action being initiated against them under the Insolvency and Bankruptcy Code (IBC). The ToI reported that over 2,100 companies had paid their dues - worth a whopping Rs. 83,000cr - after the government amended the IBC. However, banks still face an uphill task. Here's more on it.
It seems like the IBC is successfully doing its job
"The real success is the pressure on loan defaulters to clear dues. The borrowing and lending culture is changing because of IBC," said a source who did not want to be named.
The IBC amendments irked the corporate sector
The IBC amendments, which were approved earlier this year, hadn't received a warm welcome from the corporate sector. The amendments - which seek to remove hurdles in turning around failing businesses and strike a balance between interests of company promoters and lenders, customers - have already affected top industry names like Essar, the Bhushan Group, and the Jaiprakash Group.
What are the notable changes in the IBC amendment?
Changes in the amendment include treating homebuyers as financial creditors to give them a say in bankruptcy proceedings in case a builder defaults. Notably, the amendments bar wilful defaulters from taking part in the resolution process of an insolvent company, and makes it easier for company's creditors to make key decisions in the resolution/liquidation of an insolvent company.
The banking sector faces an uphill task
Despite hostility from the corporate sector, the amended IBC seems to be helping India's burdened banking sector. While the recovery of the Rs. 83,000cr does come as a relief for banks, it won't be long-lived as 26 banks in India have collectively piled up bad loans and non-performing assets worth an astronomical Rs. 7.31 lakh crore - a Rs. 2.5 lakh crore rise from 2017.
