The proposed changes to the Insolvency and Bankruptcy Code, including group insolvency and creditor-initiated insolvency, could enhance recovery rates, addressing the issue of lengthy resolution processes. The amendments, along with reforms in the legal framework, are anticipated to ease the burden on the judiciary, as per a recent report.
These modifications, along with reforms suggested by the Ministry of Corporate Affairs and Insolvency and Bankruptcy Board of India, are set to streamline recovery timelines and enhance rates for lenders, particularly in non-real estate sector cases. However, the report points out a lack of real estate sector-specific reforms in the current proposals, despite the sector’s significant involvement in corporate insolvency cases.
Structural reforms are deemed necessary for the real estate sector, with a focus on protecting homebuyers and resolving stalled housing projects. The Insolvency and Bankruptcy Code, operational for nine years, has shown improved creditor realizations compared to other recovery methods, with total recovery reaching around Rs. 4 lakh crore despite certain limitations.
