New Delhi: Vice President of India M Venkaiah Naidu has said that the enactment of Insolvency and Bankruptcy Code (IBC) was one of the success stories of Indian economic reforms and it played a critical role in reshaping the behaviour of borrowers.
Speaking at a function held to inaugurate the Insolvency Research Foundation (IRF) on Friday, the Vice President said that the IBC has helped set the stage for superior renegotiation between lenders and borrowers.
Quoting a report by Insolvency and Bankruptcy Board of India (IBBI), the Vice President said, "Since December 1, 2016, nearly 1,500 corporate debts have been brought before CIRP and 142 have already been closed, while 63 have been withdrawn. As many as 302 cases have ended in liquidation, while the resolution plans have been approved in 72 cases.
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Asserting that an efficient insolvency law was vital to stability in financial systems and fundamental to economic growth and wealth creation, the Vice President said that a sound insolvency and bankruptcy process would enable rapid resolutions for problems or risks posed by entrepreneurship.
"Without a bankruptcy law, if an organisation defaults on a loan, each claimant races to grab its share of the organisation's assets. This battle among the claimants can push the organisation into liquidation regardless of whether it has been a generally stable business model," he said.
Saying that the essence of the insolvency process was to aid against such challenges and encourage entrepreneurship, business, and more risk-taking, the Vice President said that it was, therefore, crucial to continue to invest in the development of the law by studying its impact, and investigate its strengths and weaknesses on a regular basis.
Naidu said that academics play a very important role in supporting policy development, industry research and finding innovative solutions in advanced countries and called for a similar and a more robust collaboration between academia and industry in improving the culture of research in India, especially in matters relating to insolvency and bankruptcy.
The Vice President appreciated the government for initiating a series of economic reforms to improve the investment climate in diverse areas and make India an attractive destination. The reforms have added a new dimension to the development story of India.