MUMBAI : Concerned over deteriorating asset quality post covid-19, banks are now hamstrung with regard to resolution and recovery as the government has suspended fresh insolvency cases for 12 months.
While the effect of the lockdown is expected to lead to a pile-up of bad assets, the lack of effective recovery mechanisms outside the Insolvency and Bankruptcy Code (IBC) is worrisome for lenders already reeling from bad assets.
A banker at a Mumbai-based public sector bank said this effectively closes an important avenue of debt resolution being used by lenders.
He added that there are also a few clarifications required pertaining to the IBC announcement. “For instance, while the finance ministry presentation talks about suspension of fresh