Corporate insolvency and assets restructuring professionals believe the Insolvency and Bankruptcy Code, 2016 (IBC) could be used more effectively to resolve stressed assets provided that lenders step up decision-making and adopt a more commercial approach.

Addressing a conference in Mumbai, MS Sahoo, Chairman, Insolvency and Bankruptcy Board of India (IBBI), said IBC’s potential has not been utilised fully as in many cases the recovery of dues has been put ahead of resolution despite the fact that the former serves only certain set of stakeholders, while the latter benefits all of them.

Sahoo said the Committee of Creditors (COC) is not realising the potential of IBC which provides multiple options to maximise the value of assets under the insolvency process. “The Code offers much more potential. It can look at change in the management or technology or product portfolio,” he pointed out adding that the COC has a ‘special responsibility’ to ensure the resolution happens and assets are turned around, whenever it is possible.

According to industry experts, decision-making among lenders remains one of the biggest challenges to the success of IBC in terms of resolution of stressed assets. Bankers, predominantly from the public sector, are unwilling to take decisions as they fear they could get under the lens of investigators”.

The obligations of the COC and the decision-making process on the part of COC will further evolve, he added.

“Bankers need to understand that IBC process has a huge judiciary backing and their decisions under IBC will not be questioned. In fact, none of IBC decisions were questioned. Bankers could also adopt more commercial approach to realise the value of assets,” Abizer Diwanji, Partner and National Leader - Financial Services, EY, said.

According to Rashesh Shah, Chairman and CEO, Edelweiss Group, the conflict between the interests of COC as financial creditors and the need to balance various stakeholders’ interests, the conflict between liquidation vs resolution will “slowly and steadily we need to give it room to evolve”.

The Cabinet has earlier this week approved several changes to the IBC.