MUMBAI: The suspension of fresh insolvency proceedings and coronavirus-related disruptions will impact recovery for lenders in fiscal 2021 as resolution mechanisms outside the Insolvency and Bankruptcy Code (IBC) are scarce, experts said.
Sonam Chandwani, managing partner, KS Legal and Associates, believes that banks, primarily concerned over deteriorating asset quality due to the lockdown, have been crippled by the announcement of a blanket ban on the IBC for a year.
The lack of effective recovery outside the IBC is a worrisome issue for banks looking for resolution under a legal framework, said Chandwani. “The freezing of IBC for a year closes an effective avenue of debt resolution for lenders leading to lower recoveries.