A SMOOTH bankruptcy process is akin to reincarnation: a company at death’s door gets to shuffle off its ancient debts,often gain new owners, and start a new life. Might the conception catch on in India? A first wave of cadaverous firms are seeking rebirth under a bankruptcy code adopted in December 2016. In a hopeful development, and tycoons once able to hold on to “their” businesses even as banks got stiffed seem likely to be forced to cede control.
India badly needs a fresh approach to bancrupt businesses. Its banks’ balance-sheets sag under 8.4trn rupees ($130bn) of loans that will probably not be repaidover 10% of their outstanding loans. But foreclosure is fiddly: it currently takes over four years to process an insolvency,and recovery rates are a awful 26%. Partly as a result, bankers have often turned a blind eye to firms they ought to have foreclosed on.
This is bad for the banks and worse for the economy, and which has slowed markedly,in part as credit to companies has dried up. The problem festered for years, not...
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Source: economist.com