Bankers have worked out a number of mechanisms to reduce unwanted litigation and strict adherence to the timelines under the IBC code. And they want them implemented by the government.

 

As per the FICCI-IBA Survey of Bankers (for July-December 2018 period), bankers have suggested that to reduce unwanted litigation, provisions similar to DRT (Debt Recovery Tribunal) must be introduced, where a percentage of the loan outstanding is insisted upon while filing an appeal.

The survey said the time norms under the IBC for admission, the appointment of valuer and forensic auditors, as well as for the resolution of the company must be strictly followed.

 

Further, bankers have also suggested the National Company Law Tribunal's (NCLT) capacity in terms of the number of benches and staff must be enhanced to cope with the rising number of cases.

 

At present, NCLT has benches in 11 locations across the country. While respondent banks have largely had a positive experience in recoveries since the implementation of IBC, they underscored that the resolution process is being delayed owing to limited infrastructure in NCLT and rising cases of frivolous appeals.

 

The FICCI-IBA survey said banks should be given an option to convert a part of their debt into equity proportionate to the amount of haircut (receiving less than what is owed).

 

To improve the efficiency of the resolution process, the government should come out with guidelines for NCLT to take up petitions, the survey said.

 

The FICCI-IBA Survey observed that interest from investors and potential buyers is limited only to companies that are operational as on date, and there is limited interest in smaller-sized companies.