Paradigm Shift In Default Transforms From Bank Problem To Borrower's Concern: IBBI Chairman

The biggest change the Insolvency and Bankruptcy Board of India (IBBI) has brought into the system is that NPA or default is no longer a bank problem and it has now become the borrower’s problem, said Ravi Mittal, Chairman, IBBI on Monday.

Speaking at the eighth National Summit, Insolvency and Bankruptcy Code and Valuation, he said, "Earlier the borrower used to default and come and tell the banks I am defaulting and now Rs 1,000 crore whatever amount of loan has been taken is the bank’s problem."

He added that now the borrowers are under fear and pressure to repay loans to banks so clearly there is a behavioural change amongst borrowers. 

Addressing the concerns raised by other speakers on delays and low recoveries by IBC, Mittal said, “IBC is really not a recovery mechanism IBC was thought of as a resolution mechanism and IBC is meant to bring the industry back on track. However, in common parlance, IBC is evaluated based on the recovery mode."

The chairman mentioned that the average recovery in the last six to seven years was about 32 per cent whereas last year it was 180 cases and a recovery of 36 per cent. 

"We are trying to speed up the process and are open to suggestions from stakeholders. The direct benefit of IBC is recovery, but you know the indirect benefit is even bigger and it is called a behavioural change. It is called the change in creditor and borrower relationship.” 

Mittal pointed out that around 20,000 to 25,000 cases have been withdrawn and that was even before admission amounting to around nine lakh crore. So, if one adds nine lakh crore to the three-lakh crore that one has got through resolutions, IBC has one way or another helped in bringing about 12 lakh crores back into the banking system. 

“We are trying to find out or analyse the cause of delay at various levels and we are trying to speed up the processes,” he added.