The story so far: Speaking at the sixth anniversary of the Insolvency and Bankruptcy Board of India (IBBI) on October 1, Union Finance Minister Nirmala Sitharaman said that the country could not afford to lose the “sheen” of its insolvency law, the Insolvency and Bankruptcy Code (IBC).
“We must be conscious that we can’t afford IBC to lose its sheen, especially when the Prime Minister is looking at the next 25 years of India (to emerge as a developed country by 2047). We must do whatever it takes to keep IBC as sparkling as it was when it was introduced in 2016,” the Minister said, at a time when IBC numbers have shown long delays in cases and banks having taken deep haircuts on their outstanding claims.
Addressing the issue of haircuts— the debt that banks forgo— she said it was unacceptable that banks should take a hefty haircut on loans that go through the resolution process, adding that a 95% haircut could not possibly be the “best resolution” the IBC had to offer, even if some companies came in such a bad state that only ‘junk value’ could be derived.
