Highlighting the outcomes of the insolvency law that came into force in 2016, Finance Minister Nirmala Sitharaman on Thursday criticised the Congress, saying the party always shied away from taking progressive steps for India's growth and encouraged only regressive policies.
"Despite the crying need for enacting insolvency laws, the UPA regime consciously sought to reward its cronies at the cost of the banks and operational creditors who had to run from pillar to post for recovering their dues," she said.
The Insolvency and Bankruptcy Code (IBC) provides for a market-linked and time-bound resolution of stressed assets.
Sitharaman, a senior BJP leader, said by laying down governance norms for companies in distress, the IBC has taken corporate governance to new heights in the country.
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"The credible threat that the resolution process under IBC could take the defaulting company away from the current promoters/management has resulted in better corporate governance," she said in a series of posts on X.
Prior to the IBC implementation, she said corporate distress proceedings were governed by a patchwork of legislations, which worsened rather than resolving issues.
"... like with the GST, @INCIndia was not keen on expending political capital to build consensus and implement reforms. @INCIndia has always shied away from taking progressive steps for India's growth and development and encouraged only regressive policies," she noted.
While emphasising that the IBC has brought a paradigm shift in the debtor-creditor relationship and provides a streamlined, one-stop solution for resolving insolvencies, Sitharaman said the law's prioritisation of resolution over liquidation helps preserve jobs and maintain the value of assets.
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Providing data, the minister said since its inception in 2016 until March 2024, the IBC has rescued 3,171 distressed companies and assisted in the shutdown of unviable firms, whereas the erstwhile Board of Industrial and Financial Reconstruction (BIFR) regime resolved less than 3,500 cases in the nearly 30 years since its inception in 1987.
"Overall, an amount of Rs 3.36 lakh crore has been recovered by creditors, which is around 32 per cent of what was claimed and 162 per cent of the liquidation value. On average, resolution plans are yielding about 85 per cent of the fair value of the distressed companies," she noted.
The IBC framework is continually evolving, she said, adding that the government has taken numerous steps to strengthen the insolvency framework and ensure resolutions happen in a timely manner.
"We remain committed to strengthening capacities of NCLT and NCLAT across the nation by expeditiously filling vacancies," she said.
According to the minister, the IBC has played a key role in helping banks recover from the NPA crisis created by the Congress and its allies during the UPA year through "phone banking" and indiscriminate lending.
"Giving businesses a legally secure way out in the event of failure and freeing up locked-up credit for efficient reallocation are essential steps to increase investment and growth. It is a pity that India had to wait decades before the political will could be found to implement these necessary reforms," Sitharaman said.
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