Reserve Bank Governor Addresses Conference on Insolvency & Bankruptcy Code, Emphasizes Achievements and Challenges

January 11, 2024

  In a keynote address at the Conference on Resolution of Stressed Assets and IBC – Future Road Map organized by CAFRAL, Mumbai, Shri Shaktikanta Das, Governor of the Reserve Bank of India, discussed the progress, challenges, and the way forward for the Insolvency & Bankruptcy Code (IBC) on January 11, 2024.

Key Points Addressed by Governor Das

1. Landmark Reform in India's Economic History: Governor Das emphasized that the enactment of the IBC in India has been a landmark reform, shifting the focus towards resolution mechanisms driven by empowered creditors.

2. Role of RBI in IBC Implementation: The Governor highlighted the Reserve Bank's significant role in leveraging the IBC, including issuing directions for corporate insolvency resolution process (CIRP) proceedings in specific cases.

3. Positive Indicators: The Governor pointed out positive aspects of the IBC's implementation, including successful resolutions, realization of value, and a notable behavioral shift in the form of a credible threat of insolvency.

4. Challenges and Criticisms: Acknowledging criticisms regarding the time taken for resolution and extent of haircuts, Governor Das discussed concerns about delays and suggested measures for improvement.

5. Suggestions for Improvement:

   - Pre-Packaged Insolvency Resolution Process (PPIRP):

 Highlighting the potential of PPIRP, Governor Das encouraged its adoption, especially for MSMEs, to facilitate constructive engagement between creditors and debtors.

   - Role of Creditors:

Emphasizing the fiduciary responsibility of the Committee of Creditors (CoC), the Governor stressed the importance of active involvement in the resolution process.

   - Group Insolvency Mechanism:

 Addressing the absence of a clear framework for group insolvency, Governor Das proposed legislative changes to formalize principles for effective group insolvency resolution.

   - Vibrant Secondary Market:

 Recognizing the need for a robust secondary market for stressed assets, the Governor outlined measures taken by the RBI, including the formation of the Secondary Loan Market Association (SLMA).

6. Conclusion:Governor Das concluded by expressing the Reserve Bank's continued interest in the orderly and sustained evolution of the IBC ecosystem, recognizing its role in improving the asset quality of the banking sector.

For more details, refer to the full speech document (259 kb) released on January 11, 2024, on the Reserve Bank of India's official website.