New Delhi: The creditors have become more willing to lend emergency companies for lower interest rates because the insolvency and bankruptcy law (IBC) has been adopted, showing that they are convinced that they will receive fees in the event of failure, insolvency and bankruptcy council (IBBI). 2016.
In the update issued on Tuesday, IBBI chairman Ravi Mital quoted a study conducted by IIM Bangalore, which showed that since IBC was accepted there was a 3.3% reduction in the cost of debt to desperate companies. Mital called it “an improved credit environment for desperate companies”.
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“A possible explanation could be that desperate companies significantly improve their” credit channels “and at the same time record lower loan costs in the world of IBC with regard to their undisturbed counterparts,” said IIM, which used data from national electronic governments, information services established by front banks and public institutions. the means.
IBBI stated that she quoted a study that bankruptcy Act had forced debtors to comply with loan payment plans.
In the case of a company that had their anxiety resolved within the IBC, there was a 50% increase in the average cost of employees in three years after the resolution, indicating its contribution to maintaining and adding jobs.
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The introduction of IBC brought a sense of responsibility among enterprises, said Ritesh Kumar Adatiya, director of insolvency professionals NPV PVT. Ltd.
“This also brings comfort to the creditor that if the promoters do not behave, they have a very effective tool as discouraging. This additional comfort helps to reduce risk bonuses, and therefore the cost of the debt has decreased a bit,” he added.
Less delayed loans
Separately IIM studies showed that in 2018–2020 and 2020-24 the value of loans on maturity and number of rental accounts considered delayed.
The study also reported faster solutions to delayed payments. The share of loans passes from “delayed” to “normal” annually has increased, indicating the improvement of credit culture of corporations, she said.
The average number of days when the rental account remains in the category of “coating” before switching to “normal” out of 248-344 days to 30-87 days. This shows that both debtors and creditors are trying to solve delinquency first, IBBI said, quoting the study. The data carried the classification of loans to different categories based on the administration of creditors.
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The study stated that it provided evidence that IBC caused “significant changes in the behavior in the credit ecosystem” that include corporations and banks. Loan monitoring has improved, the number of accounts delayed decreased after maturity, and there was a systematic reduction in the use of debt, especially long -term debt, he added.
“We also found that the growing tendency to settle debts to avoid negotiations on the insolvency solution of enterprises that we interpret as a positive sign,” he said. It has also been shown that banks effectively use the new legal apparatus for recovering the claim, either by resolutions or liquidation, the study added.
(tagstotranslate) IBC Impact
