It’s been a decent start on how India has gone about systematically building the ecosystem for insolvency and bankruptcy, but more dividends could be reaped if technology application is advanced to enhance case management by the NCLT for strict timekeeping of insolvency cases.

Technology should also be used for data mining and analysis for constant review of the IBC impact on the ground.

This is the only big recommendation that the Chief Economic Adviser Krishnamurthy V Subramanian provides in the Economic Survey 2018-19 for those keen to see better execution of the Insolvency and Bankruptcy Code (IBC) on the ground.

Beyond this and the listing of the reforms in pipeline such as cross-border insolvency, group insolvency and individual insolvency, there is very little strategic policy inputs or ideas in those 10-odd pages dedicated to IBC framework to address the current worries around the execution.

Delay draws flak

There is nothing in the Survey that deals with the ongoing criticism that inaction against large defaulters was undermining credibility of IBC 2016 or even the perception in the market that large defaulters are still gaming the system for debt recovery.

According to the Survey, till March 31, 2019, the Corporate Insolvency Resolution Process (CIRP) yielded a resolution of 94 cases which has resulted in the settlement of claims of financial creditors of ₹1,73,359 crore. These cases include six out of the first set of 12 large accounts for whom resolution was initiated by banks in 2017, as directed by the RBI.

The problem is that the other six large cases are still pending, raising criticism on the absence of time-bound period for resolution in the IBC process.

All that the Survey promises — while acknowledging time-sensitive resolution as a cornerstone of the IBC — are that measures are under way to address delays.

While the Government has created six additional posts of the judicial and technical members for NCLAT, setting up Circuit Benches of NCLAT is “under consideration”, the Survey has said.

Banking sector, NBFCs

The Economic Survey has very little policy prescriptions on how to fix the current banking sector mess or how to deal with the liquidity crunch faced by the non-banking finance companies (NBFCs).

While providing extensive data points around the state of banking sector and NBFCs, the Survey does highlight that financial flows to the economy remained constrained because of decline in the amount of equity finance raised from capital markets and stress in the NBFC sector.

Capital mobilised through public equity issuance declined by 81 per cent in 2018-19. Credit growth rate year-on-year of the NBFCs have declined from 30 per cent in March 2018 to 9 per cent in March 2019 — a clear pointer that liquidity conditions have remained tight.

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