Money & Banking

Corporate insolvency: More cases closed by liquidation than by resolution, says RBI report

Our Bureau Mumbai | Updated on July 27, 2020 Published on July 27, 2020

As per the Reserve Bank of India’s latest Financial Stability Report, about 57 per cent (914 cases) of the CIRPs were closed under liquidation and only about 14 per cent (221 cases) ended with resolution plans   -  Bloomberg

57% (914 cases) closed under liquidation; only 14% (221 cases) ended with resolution plans

More number of cases have been closed by liquidation than by resolution ever since the corporate insolvency resolution process (CIRP) came into effect from December 1, 2016, going by the status of CIRPs as on March 31, 2020.

As per the Reserve Bank of India’s latest Financial Stability Report (FSR), about 57 per cent (914 cases) of the CIRPs were closed under liquidation and only about 14 per cent (221 cases) ended with resolution plans.

“It is, however, important to note that 73 per cent of the CIRPs that ended in liquidation (637 out of 879, of which data is available) were earlier with the Board of Industrial and Financial Reconstruction (BIFR) or defunct and the economic value of most of these corporate debtors had already eroded before they were admitted into CIRP,” the Report said.

According to the status of CIRPs, as on March 31, 2020, the number of cases that were closed via resolution; or liquidation; or appeal/review/settled/others; or withdrawal under Section 12A of the Insolvency and Bankruptcy Code stood at 1,604.

The total number of cases admitted in the National Company Law Tribunals (NCLTs) since inception stood at 3,774 and those undergoing CIRP was 2,170.

Of the 2,170 cases that were undergoing CIRP, 738 had been under the process for more than 270 days; 494 for more than 180 days but less than or equal to 270 days; 561 cases for more than 90 days but less than or equal to 180 days; and 377 cases for less than or equal to 90 days.

Sectoral distribution of cases

Going by the sectoral distribution of corporate debtors under CIRPs, in the case of the ‘manufacturing’ and ‘real estate, renting and business activities’ sectors, the number of CIRP cases ‘closed’ and ‘ongoing’ stood at 676 and 851, and 307 and 450, respectively.

In the case of ‘construction’ and ‘wholesale and retail trade’ sectors, the number of cases CIRP cases ‘closed’ and ‘ongoing’ stood at 147 and 261, and 168 and 210, respectively.

With respect to ‘hotels and restaurants’ and ‘electricity and others’ sectors, the number of CIRP cases ‘closed’ and ‘ongoing’ stood at 42 and 46, and 30 and 87, respectively.

For ‘transport, storage and communications’ and ‘others’ sectors, the number of CIRP cases ‘closed’ and ‘ongoing’ stood at 57 and 55, and 177 and 210, respectively.

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Published on July 27, 2020
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