More Confidence in Recoveries Under IBC

Creditors have become more willing to lend to distressed firms at lower interest rates since the Insolvency and Bankruptcy Code (IBC) was adopted, showing they are more confident of recovering dues in case of a default, the Insolvency and Bankruptcy Board of India (IBBI) said in its FY25 update on outcomes of debt resolution.

- Gireesh Chandra Prasad

NEW DELHI: The IBC came into force on 1 December 2016.

In the update, released on Tuesday, IBBI chairman Ravi Mital cited a study conducted by IIM Bangalore that showed there has been a 3.3% reduction in the cost of debt for distressed firms since the IBC was adopted. Mital termed this an "improved credit environment for distressed firms".

"A possible explanation could be that distressed firms significantly improved their 'credit channels' while experiencing lower cost of credit in the post-IBC world with respect to their non-distressed counterparts," said the IIM study, which used data from National E-governance Services Ltd, an information utility set up by leading banks and public institutions. The study did not provide absolute values for total debt or the cost of funds.