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CEA Subramanian says 'creative destruction' crucial for Indian economy, IBC has scope for improvement 

Financial Express , Oct 14, 2020

Chief Economic Adviser K V Subramanian today said that stressed assets are important components of a market economy and it is crucial to focus on various stakeholders that enable a process of creative destruction. K V Subramanian added that the ecosystem of creative destruction is a very important part of any economy as if we look at the Indian economy before IBC, the exit process wasn’t enabled well. It is to be noted that creative destruction means getting over the long-standing practices in order to make way for innovation, which is often seen as a driving force of capitalism.

Speaking at a FICCI webinar on ‘Investment Opportunities in Stressed Assets in India’, K V Subramanian further said that the Insolvency and Bankruptcy Code (IBC) is an evolving process and there is still scope for making it far more efficient. He underlined that corporate India needs to recognize and respect the equity contract.

The Insolvency and Bankruptcy Code 2016 is a landmark law that has contributed to ensuring the ease of doing business in India. However, the cases of liquidation are rising faster than those which are resolved. “The main reason for same is that most of the corporate debtors under CIRP are those where there are no assets or lucrative business for which a Resolution Applicant can bid for,” Daizy Chawla, Senior Partner, Singh & Associates, had told Financial Express Online in an interview. She had added that a corporate debtor may go into CIRP proceedings and there are chances that they receive a haircut to the tune of 90 per cent, which is one of the reasons why not every financial institution or operational creditor prefer I&B Code

“Over 13,000 insolvency cases have been filed of which just under 4,000 have been admitted. So, there’s a large backlog of cases to be admitted,” Nikhil Shah, MD, Alvarez & Marsal said in the same webinar. Past President of FICCI and Chairman & CEO of Edelweiss Group Rashesh Shah said that there are actually a lot of investment solutions which convert the NPAs or stressed assets into very high-performing assets.

Meanwhile, the government has taken proactive steps to fight stressed assets, in an effort the check the rising NPAs of banks. India has been taking progressive steps to facilitate investments into various stressed asset segments, said Pavan Kapoor, Ambassador of India to UAE at the FICCI webinar.

 

 

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 Investment Opportunities in Stressed Assets in India