New Delhi, December 4 (IANS). S&P Global Ratings has upgraded India’s insolvency framework from Group C to Group B. This is because of the strong creditor protection and efficiency provided by the Insolvency and Bankruptcy Code (IBC).
The upgrade comes at a time when S&P recently upgraded India’s “creditor friendliness” score from weak to moderate. This score reflects the track record of creditor-driven solutions.
The rating agency said confidence in the system has increased due to the high recovery rate and increased timeliness in recent cases.
S&P said in the note that in our view the IBC has strengthened credit discipline and shifted the resolution process in favor of creditors, which may put promoters at risk of losing control over their business, which was not the case in the previous resolution system.
The report said that in the pre-IBC regime the recovery was around 15-20 per cent, whereas now it is above 30 per cent.
The average time to resolve bad loans has also declined sharply to about two years, from six to eight years earlier, the report said.
Noting this progress, the rating agency cautioned that India’s insolvency system still lags behind more mature systems in Group A and some areas in Group B.
The rating agency said overall recovery rates remain modest by global standards and vary widely across sectors, with asset-heavy industries like steel and power performing better.
S&P also pointed to structural concerns, saying secured and unsecured creditors vote together in the same class, which could dilute the influence of secured lenders when unsecured loans become large.
S&P said the impact of measures designed to prevent wrongful outcomes – such as meeting recovery value liquidation benchmarks and maintaining full court oversight – will need to be continuously monitored.
–IANS
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