Banks could see one of the best quarterly recoveries after the Covid-19 crisis in the fourth quarter of FY23 under the Insolvency and Bankruptcy Code (IBC), 2016, following resolution of Sintex Industries and Reliance Home Finance.
Monies aggregating about ₹6,600 crore, are expected to be received from the resolution of Sintex Industries and Reliance Home Finance via the corporate insolvency resolution process (CIRP) under IBC from successful resolution applicants Reliance Industries Ltd (RIL) - Assets Care & Reconstruction Enterprise (ACRE) combine and Authum Investments and Infrastructure, respectively.
This could result in reversal of provisions, thereby boosting banks’ bottomline, and improve the asset quality parameters further.
Banks will be recovering about 48 per cent of the claimed amount of about ₹7,800 crore from the resolution of Sintex industries.
In the case of the resolution of Reliance Home Finance, lenders will be recovering only about 26 per cent of the claimed amount of about ₹11,200 crore.
“The RIL-ACRE combine have indicated that they will advance the payment so that banks receive it in the fourth quarter. They were originally scheduled to pay in the first week of April 2023,” said a banker.
He observed that recovery is better in Sintex Industries vis-a-vis Reliance Home Finance as the security value is higher.
Fall in recovery rate
According to a ASSOCHAM-CRISIL report, there has been an increase in cases admitted under IBC from diverse sectors and a shift in power to creditors from debtors — operational creditors (OCs) triggered about 51 per cent of CIRP, followed by about 44 per cent by financial creditors (FCs), and the remaining by the corporate debtors themselves.
“If we compare recovery through the various mechanisms, IBC has fared better at an overall level. However, the recovery rate through IBC has come down in the recent past (to 24 per cent in FY22 from 46 per cent in FY20)…,” the report said.
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