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Economic Survey 2023: Behavioural change among debtors a far-reaching spillover effect of IBC

31 Jan , 2023   By : Monika Singh


Economic Survey 2023: Behavioural change among debtors a far-reaching spillover effect of IBC

Behavioural change effectuated among debtors is one of the far-reaching spillover effects of the insolvency law, which is also facilitating the exit of distressed firms and thereby allocating scare economic resources for more productive use, the Economic Survey said on Tuesday.

As many as 5,893 Corporate Insolvency Resolution Processes (CIRPs) had commenced by end-September 2022, of which 67 per cent have been closed, under the Insolvency and Bankruptcy Code (IBC) that came into effect in December 2016.



Citing Reserve Bank of India (RBI) data, the Economic Survey 2022-23 said that in FY22, the total amount recovered by Scheduled Commercial Banks (SCBs) under the Code was the highest compared to other channels.




As per the data compiled in the survey, the amount recovered by SCBs through the Code was Rs 89,661 crore in 2021-22.

During the same period, the recovery through SARFAESI Act was Rs 27,349 crore, Debt Recovery Tribunals (DRTs) was Rs 12,114 crore and Lok Adalats stood was Rs 2,777 crore. All the figures are provisional.

“One of the far-reaching spillover effects of the Code has been the behavioural change effectuated by it among debtors. The fear of losing control over the CD upon initiation of CIRP has nudged thousands of debtors to settle their dues even before the initiation of insolvency proceedings.

“Until September 30 2022, 23,417 applications for initiation of CIRPs of CDs (Corporate Debtors) having underlying default of Rs 7.3 lakh crore were disposed of before their admission into CIRP,” the survey said.

According to the survey, the resilience of the domestic financial system is reflected in the healthy balance sheet of banks, stronger capital levels of NBFCs (Non-Banking Financial Companies) and robust growth in the AUM (Assets Under Management) of domestic mutual funds.




Buoyant demand for bank credit and early signs of a revival in the investment cycle are benefiting from improving asset quality, a return to profitability and resilient capital and liquidity buffers. Further, IBC mechanism continues to support the ‘Ease of Doing Business’ in India by facilitating easy exit with time bound resolutions for firms.

“These strengths are helping the financial system absorb external spillovers, tightening global financial conditions and high volatility in financial markets,” it said. 


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