Investigating the Validity of Government Declarations concerning the Financial Industry

The Insolvency and Bankruptcy Code (IBC), introduced in 2016, has been a significant step towards ensuring the early detection of stress in businesses and the timely initiation of insolvency resolution. This landmark legislation, overseen by the Insolvency and Bankruptcy Board of India (IBBI), aims to revive viable businesses, liquidate unviable ones, minimise losses for all stakeholders, and prevent the destruction of value in failed businesses.

In October 2017, the Ministry of Finance announced a decision to recapitalize Public Sector Banks (PSBs) to the tune of Rs. 2,11,000 crores over the next two years. This recapitalization was planned through budgetary provision, recapitalization bonds, and raising capital from the market. The government's approach for recapitalizing PSBs was differentiated, based on the strength of each bank.

The IBC has seen considerable action since its inception. As of December 2018, a total of 1484 cases had been admitted for resolution under IBC, out of which 78 cases had been resolved. An amount of Rs. 65,796 crores was realised by Financial Creditors against an admitted claim amount of Rs. 1,36,128 crores.

The BJP government published an infographic on the 48-months portal, making claims about the banking sector. The infographic highlighted the IBC as a significant factor in boosting the sentiments in the market, along with the referring of cases under IBC to the National Company Law Tribunal (NCLT) and the recapitalization of public sector banks.

The annual report (2017-18) of the Ministry of Finance further attested to this, stating that these actions had a positive impact on the market.

The IBC regulates Insolvency Professionals, Insolvency Professional Agencies, Insolvency Professional Entities, and Information Utilities. The government has also put in place an approval framework for proposals to amalgamate nationalized banks with a view to facilitating consolidation among the nationalized banks.

In September 2018, it was approved that Bank of Baroda, Vijaya Bank, and Dena Bank may consider amalgamation of the three banks through the Alternative Mechanism (AM). This decision was made to promote consolidation within PSBs, a recommendation made by various committees over the years, including the Narasimham Committee (1998), Indian Banks' Association Report (2004), Planning Commission Report (2008), Leeladhar Committee (2008) and Nayak Committee (2014).

The Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 provide for the amalgamation of any nationalized bank with any other nationalized bank or any other banking institution. The IBC, passed by Parliament in May 2016 and notified in the same month, and the subsequent establishment of the IBBI in October 2016, mark a new era in India's approach to insolvency and bankruptcy.

The Ministry of Corporate Affairs (MoCA) was entrusted with the responsibility to administer the Code following its notification in 2016. As of now, the search results do not provide specific information about the committed persons or institutions tasked with reviewing the compatibility of the alternative procedure for the fusion of PSBs.

The historic IBC has indeed led to significant results, as evidenced by the data shared by the government. The IBC, along with the recapitalization of PSBs, is a testament to the government's commitment to strengthening India's banking sector and fostering a conducive environment for businesses to thrive.