The primary objective of the Insolvency and Bankruptcy Code (IBC) process is resolution of a distressed firm, but the recovery percentage also needs to be kept in mind, SBI Managing Director J Swaminathan said on Sunday.
Financial and operational creditors owe money to companies facing insolvency proceedings and so recovery has to be an important factor while achieving resolution of stressed assets, he noted.
"All of us clearly understand, as the lenders' forum, that resolution is the primary objective of legislation like IBC. So, I don't think that there is any moving away from that particular point.
"We will stay the course on those lines, despite the criticism that either we are being pushed more towards recovery, or we are just being mindful of a resolution, disregarding the recovery percentage," Swaminathan said at an event organised by Indian Institute of Management, Ahmedabad.
He, however, added that while attempting a resolution, "we cannot lose sight of recovery".Swaminathan said if the narrative starts building towards haircuts, then it is likely that the lenders may not take any decision, which will lead to paralysis, and then the stressed units will go into liquidation. "In such a case, the entire objective of legislation like IBC towards resolving corporate stress in an orderly manner will be defeated," he pointed out. Haircut taken by lenders as part of resolution plans approved under IBC refers to the shortfall in recovery to creditors as compared to their claims submitted in the insolvency process of a stressed borrower. PTI
Resolution primary objective of IBC; but need to be mindful of recovery too: SBI MD J Swaminathan
Mumbai: The primary objective of the Insolvency and Bankruptcy Code (IBC) process is resolution of a distressed firm, but the recovery percentage also needs to be kept in mind, SBI Managing Director J Swaminathan said on Sunday.
Financial and operational creditors owe money to companies facing insolvency proceedings and so recovery has to be an important factor while achieving resolution of stressed assets, he noted.
"All of us clearly understand, as the lenders' forum, that resolution is the primary objective of legislation like IBC. So, I don't think that there is any moving away from that particular point.
"We will stay the course on those lines, despite the criticism that either we are being pushed more towards recovery, or we are just being mindful of a resolution, disregarding the recovery percentage," Swaminathan said at an event organised by Indian Institute of Management, Ahmedabad.
He, however, added that while attempting a resolution, "we cannot lose sight of recovery".Swaminathan said if the narrative starts building towards haircuts, then it is likely that the lenders may not take any decision, which will lead to paralysis, and then the stressed units will go into liquidation. "In such a case, the entire objective of legislation like IBC towards resolving corporate stress in an orderly manner will be defeated," he pointed out. Haircut taken by lenders as part of resolution plans approved under IBC refers to the shortfall in recovery to creditors as compared to their claims submitted in the insolvency process of a stressed borrower.
