IBC Law: Banks asked to cut adjournments, speed up resolution process filings

The central government on Monday asked commercial banks to step up efforts to reduce adjournments and minimise delays in filing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. CIRP applications are formal petitions that are filed to start the resolution process under the bankruptcy law. The submission of this document before corporate bankruptcy and insolvency court NCLT is crucial in the insolvency process. The court acts as the adjudicating authority for corporate insolvency cases.

DFS Secretary M Nagaraju spearheaded a key meeting to review the cases admitted under the bankruptcy law. He acknowledged the progress made in the cases admitted and resolved or rescued during the course of the year.

A detailed review was conducted of the top 20 accounts pending admission and 10 accounts pending resolution, with the aim of expediting the disposal of these cases. The resolution in 20 high-value accounts had been achieved through admission, assignment and disposal at the NCLT, through coordinated efforts by all stakeholders.

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A host of issues related to pending Insolvency and Bankruptcy (IBC) matters were discussed during the meeting.

The banks were advised to adopt a collaborative approach to ensure:

• Maximisation of asset value
• Improved recovery
• Timely resolution

Public sector bank CEOs were advised to regularly monitor key cases pending for admission and resolution.

The meeting concluded with an emphasis on early resolution of pending cases and removal of procedural inefficiencies to improve recovery outcomes.

Who can file a CIRP application?

Three types of applicants can file a CIRP application -- or a legal request to the NCLT to begin insolvency proceedings against a defaulting company:

• Financial creditors
• Operational creditors
• Corporate debtors

Upon finding a default, the tribunal admits the application and formally starts the insolvency process.

These applications are the gateway to insolvency resolution. Without admission of a CIRP application, banks banks cannot formally start the resolution process, creditors cannot take collective control of the company and asset value may deteriorate due to delays.

Why does the government monitor CIRP filings closely?

PSU commercial banks banks hold a large share of stressed corporate loans. Faster CIRP filings can lead to:

• Quicker NCLT admission
• Faster bidding for distressed assets
• Better recovery for banks

Here are answers to a few frequently asked questions (FAQs) on the subject:

What did the government ask banks to do?

Commercial banks have been asked to reduce adjournments and minimise delays in filing Corporate Insolvency Resolution Process (CIRP) applications under the Insolvency and Bankruptcy Code, 2016.

The direction came during a review meeting led by DFS Secretary M Nagaraju.

What Happened in the Meeting?

The central government directed commercial banks to cut adjournments and delays in filing Corporate Insolvency Resolution Process (CIRP) applications under the IBC law. Banks were urged to collaborate for asset value maximisation, better recovery, and timely outcomes.

What is a CIRP application?

It is a formal petition to the National Company Law Tribunal (NCLT) to initiate insolvency resolution against a defaulting company, serving as the gateway to the process.

Who can file a CIRP application?

Financial creditors, operational creditors, or the corporate debtor itself can file upon detecting a default.

Why focus on reducing delays?

Delays erode asset value; faster NCLT admissions enable quicker bidding, resolution, and higher

Why does the government closely monitor CIRP filings?

PSU banks hold a large share of stressed corporate loans. Faster CIRP filings can lead to quicker NCLT admission, faster bidding for distressed assets and better recovery outcomes for lenders.