Average recovery rate under the IBC is 45%, says CEA Subramanian
The Hindu
CEA’s remarks appeared to have been triggered by criticism about the low recovery rates and the processes of the IBC
Chief Economic Advisor Krishnamurthy Subramanian took on critics of the Insolvency and Bankruptcy Code (IBC) for labelling its performance as ‘skewed’ with low recovery rates, arguing they are ‘cherry-picking’ IBC data and a lot of the loans going through the IBC process were a result of ‘crony lending’ before 2014.
Speaking at the fifth annual day of the Insolvency and Bankruptcy Board of India (IBBI), the CEA pointed out that the average recovery rate is 45% under the IBC and this compares favourably with the U.S., where the recovery rate is 59%.
“Some analysts will say this 45% is skewed by one or two very large recoveries and they will exclude that and say there have been only 25% recoveries. Now as an economist, I actually want to highlight that those outliers have also resulted because of IBC and you cannot exclude them. You cannot cherry pick and then compute the average to say it is just 25%,” Mr Subramanian asserted.