We cannot afford to have IBC lose its sheen, says Nirmala Sitharaman
Amid concerns in certain quarters over the pace of the insolvency resolution process, Finance Minister Nirmala Sitharaman on Saturday said that one can neither afford to have the legislation ''lose its sheen'' nor let early stress warnings go unnoticed.
The minister, who is also in charge of the corporate affairs ministry, touched upon the disruptions being faced by companies due to global developments and emphasised that ''we have to keep our ears very close to the ground to know actually what is developing in the system (due to global developments)''.
In the context of the Insolvency and Bankruptcy Code (IBC), which provides for a market-linked and time-bound resolution of distressed companies, Sitharaman stressed the importance of resolution professionals and that the efforts are more to keep companies as going concern.
''I want all of us, including me, to be conscious that we cannot afford to have IBC lose its sheen... whatever it takes for all of us to keep it (IBC) as sparkling as it was when we brought it...,'' she said while speaking at a function here to celebrate the sixth annual day of IBBI.
Her comments come against the backdrop of reports and concerns expressed in certain quarters about delays and significant haircuts taken by creditors in certain insolvency resolution processes.
While noting that delay is the first big culprit in the erosion of the value of assets, the minister also said that companies in distress cannot be treated with indifference or even with the delay.
IBBI should be kept on its toes so that it can bring in the required interventions, which will be a critical area for years to come. ''We cannot afford to have early stress warnings which are coming up go unnoticed,'' she said.
According to the minister, IBC and IBBI are facing a very different world post the pandemic where there are global disruptions that have nothing to do with the country, impacting companies.
''... the disruptions due to the global developments that are having on us are also bringing a situation where many of the banks themselves are wondering how they are going to take it further (in terms of) distress some of the clients are feeling,'' she said.
Further, the minister said that there is greater stress and greater exogenous factors that are playing on our companies' health.
''I am not speaking of dooms day but I am only speaking about companies, few and far between, which can experience such a situation for whom early and timely detection (will help),'' she added.
Sitharaman also expressed concerns over the pre-packaged insolvency resolution framework introduced for MSMEs during the pandemic not ''taking off'' and appealed to the stakeholders to look at the factors that might be holding back the entities from opting for the framework.
As many as 1,934 corporate debtors have been rescued through the Code till June this year. These include 517 through resolution plans, 774 through appeal or review or settlement and 643 through withdrawal. In value terms, around 69 per cent of distressed assets, which entered the process under the Code, have been resolved, as per IBBI.
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