Online platform for sale of stressed assets


The Insolvency and Bankruptcy Code (IBC) has brought a new era of reform, declared Dr Mukulita Vjayawargiya, Whole Time Member, Insolvency and Bankruptcy Board of India (IBBI).

She was speaking at a panel discussion on ‘Insolvency and Bankruptcy Code (IBC): How Can IBC Live up to its High Expectations?’ at the two-day FIBAC 2019 conference, organised by FICCI and IBA in Mumbai on 19 August 2019.

The earlier system of justice had not been successful, and hence the premise had been changed, she explained.

The IBC saves judicial time and has an ecosystem which has gone down well across the board.

She also mentioned about the plans of IBBI to offer an online platform for sale of stressed assets.

Dr Vjayawargiya emphasised on the need for financial institutions to provide interim finance for IBC referred cases and similar activities.

Following her presentation, leading financial executives gave their insights into the reforms taking place in the country.

Neetu Chitkara, MD and Partner, Boston Consulting Group, pointed out: “One of the biggest contributions of the IBC is the change in the credit culture of the country, a change in the mindset of the promoters and the seriousness with which they now consider credit and bankruptcy.”

Bahram Vakil, Founder and Senior Partner, AZB & Partners, felt that there will be more clarity in the coming months.

He identified four main areas where the IBC has had a positive impact: (i) The time frame where earlier cases took about six years to get resolved, the average now is 324 days.
(ii) Recovery. The recovery rate has doubled, and the recovery of financial creditors and operational creditors is virtually identical. (iii) Costs have come down to one per cent from nine per cent.
(iv) There has been a massive behavioural change. “People realise that if you borrow you have to pay, otherwise the consequences are quite strict,” he added.

Anshula Kant, Managing Director, State Bank of India, explained that mechanisms like DRT or SARFAESI are recovery mechanisms, not resolution mechanisms. “That is the key difference between this code and what we had in the past.”

Resolution is possible only under the IBC. “It is a capital-starved country and we cannot afford to lose investments that have been made and put in this country,” she said.

“Forming a new bankruptcy code is not easy,” pronounced Haseeb Malik, Partner and Head of Asia Corporate and Traded Credit, Varde Partners, Singapore.

What is happening in India is institutionalisation of distress; it is still in its infancy.

For India to succeed as the US$5 trillion economy that is aspired, it has to have a functioning distress market. “The intent with which the code was drafted is pretty good; we have to evolve it further,” he said.

But the period of recovery should have come down to less than 324 days, said Dr Fareed Ahmed, Executive Director, Punjab and Sind Bank. Although the Government has increased the number of NCLT benches from 10 to 15, the NCLT bandwidth is still not enough.

Dr Rajesh Kumar Yaduvanshi, Executive Director, Punjab National Bank, said that the number of accounts that have gone for liquidation is quite high.

“There is a need to develop the market for stressed assets,” he said. In most cases, the bids are below the liquidation value, and there is no option for bankers or the COC to go for liquidation.

The discussion at the conference was followed by another one that debated on ‘Towards Cashless India: Potential Evolution of Indian Payments Framework and Implication for Bank Strategy.’

H R Khan Former Deputy Governor, RBI, had a chat with Prateek Roongta, MD and Partner, Boston Consulting Group. “We have been a cash-driven society,” Khan pointed out.

“How do we balance these two cultures?” he mulled, disclosing that he is now a fan of ‘physital’. He believes not in a cashless, but in a less-cash and cash-light society.

“The way forward is to increase digital and reduce cash, but cashless India is unrealistic.” He conceded that there has been a big revolution in digitisation of payments. Yet, India still has a lot of ground to cover.

Dilip Asbe, MD and CEO, National Payments Corporation of India, believes that partnerships between banks and technology providers have worked well. “I would like to see more QR transactions, but through the organised retailer,” he stated.

Anubrata Biswas, MD & CEO, Airtel Payments Bank, felt that the term ‘payment bank’ is a misnomer. They are fundamentally a digital and financially inclusive vehicle. They offer banks an opportunity through their variable service delivery costs.

T R Ramachandran, Group Country Manager, India & South Asia, Visa, felt that the country needs to solve for the convenience of commerce. “Using currency which costs 2.5 per cent of GDP is ridiculous,” he declared.

He added that the money can be spent for so many other beneficial reasons.

He further mentioned that digital initiatives can only succeed when the economics of the same are found acceptable to incentivise the various stakeholders to collaborate and work. Anything whose economics do not work out will not be accepted.

Kiran Shetty, CEO & Regional Head, India & South Asia, SWIFT, disclosed that “we take nine times the time to process a transaction and it costs three times what it does in a developed economy. There is need for great evolution in that space.”


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