Bankruptcy Blues: Lenders Suffer Two-Thirds Loss via Insolvency Resolutions

Banks are facing substantial losses in corporate insolvency cases, with haircuts exceeding two-thirds due to delays and litigations. Over 71% of cases extend beyond the 270-day timeline, often resulting in liquidation. The Insolvency and Bankruptcy Code was designed for better lender value recovery but faces challenges in execution.

Banks continue to grapple with significant losses in corporate insolvency cases, as reported by a recent analysis revealing that haircuts are exceeding two-thirds in bankruptcy court resolutions.

Delays plague the process, with more than 71% of cases surpassing the 270-day guideline, contributing to a rise in liquidation orders due to value erosion, according to the report by Icra.

Despite the Insolvency and Bankruptcy Code's intent to expedite resolutions and enhance recovery for lenders, litigation from promoters and creditors is causing setbacks, with larger accounts notably impacting overall recovery rates.

(With inputs from agencies.)