IBC Recovery Rate at 32 Per Cent By Dec Quarter

The overall recovery rate till Q3FY24 was 31.86 per cent implying a haircut of approximately 68 per cent. The cumulative recovery rate has been on a downtrend, decreasing from 43 per cent in Q1FY20 and 32.9 per cent in Q4FY22 as larger resolutions have already been executed and a significant number of liquidated cases were either Board for Industrial and Financial Reconstruction cases and defunct with high-resolution time.

After slowing in the pandemic period of FY21 and FY22, the number of insolvency cases referred has increased by around 19 per cent in Q2FY24. However, despite the increase, the number of cases admitted to the insolvency process continued to be lower compared to earlier quarters in FY20, according to Care Ratings.

The IBC seems to be incentivising debtors to settle their defaults even before the cases are admitted under the code with over 27,500 applications for initiation of Corporate Insolvency Resolution Processes with an underlying default of Rs 9.74 lakh crore were withdrawn before their admission.

Meanwhile, the number of ongoing CIRPs has declined on a y-o-y as well as sequential basis indicating that cases have been disposed at a faster pace compared to their admission. Of the close to 1,900 ongoing CIRPs, there has been a delay of more than 270 days for the completion of the process of 68 per cent in December 2023 as compared to 73 per cent in December 2021 and 64 per cent in December 2022.

However, the ‘more than 180 days but less than 270 days’ segment is the smallest highlighting the fact that while more cases are being added and earlier cases too are moving forward, they seem to be delayed in the process. Further, the share of ‘more than 90 days but less than 180 days’ segment has moved up, while the last segment - less than 90 days - has reduced.

The ratio of resolution to liquidation also has improved from 0.21 in FY18 to 0.64 in Q3FY24.