2 days ago
IBBI Study Proposes Insolvency Professionals for Failed Bank Liquidations
An IBBI study says trained insolvency professionals could help manage what happens to a bank after it fails.
They would handle the bank’s remaining assets, while the RBI and DICGC would supervise them.
The plan would not put banks fully under the Insolvency and Bankruptcy Code.
DICGC insures deposits up to Rs 5 lakh per depositor, and the study says more than 97% of depositors in failed banks now receive their money on time.
After paying insured depositors, DICGC must try to recover that money from the failed bank’s assets.
The study says that recovery stage can be difficult.
It recommends deadlines, public updates and audits to make the process clearer.
It also suggests giving DICGC more powers to help resolve weak banks.
An IBBI study proposes appointing certified insolvency professionals to manage failed-bank liquidations under RBI and DICGC oversight.
The proposal would not bring banks fully under the Insolvency and Bankruptcy Code.
The study says DICGC now pays more than 97% of depositors in failed banks in a timely manner, with deposits insured up to Rs 5 lakh per depositor.
After paying insured depositors, DICGC must recover money from the failed bank’s remaining assets, a process the study identifies as a weakness.
Recommendations include liquidation deadlines, quarterly public reports, audits, replacing underperforming liquidators, and giving DICGC additional resolution powers.
- Who
- The Insolvency and Bankruptcy Board of India made the recommendations; insolvency professionals would work under RBI and DICGC oversight.
- What
- A study proposes involving IBBI-certified insolvency professionals in failed-bank liquidations, alongside changes to timelines, reporting and DICGC powers.
- Where
- The proposal concerns bank liquidation in India.
- When
- The article does not state when the study was issued.
- Why
- The study says recovery from failed banks’ remaining assets remains difficult after DICGC pays insured depositors.
Key facts
- Proposed liquidators
- IBBI-certified insolvency professionals
- Oversight
- Reserve Bank of India and Deposit Insurance and Credit Guarantee Corporation
- IBC coverage
- The proposal would not bring banks fully under the Insolvency and Bankruptcy Code.
- Deposit insurance limit
- Rs 5 lakh per depositor
- Depositor payments
- The study says more than 97% of depositors in failed banks now receive DICGC payments in a timely manner.
- Suggested claims deadline
- Complete claims verification within 60 days.
- Suggested auction deadline
- Auction properties within six months.
- PMC Bank example
- DICGC paid Rs 3,791.6 crore toward insured deposits after PMC Bank collapsed in 2019.
Quotes
Insolvency expert
An unnamed insolvency expert quoted in the article.
“One key recommendation is to integrate IPs into the bank liquidation framework. This would involve appointing IBBI-certified professionals to administer bank liquidations under the guidance of RBI/DICGC, without bringing banks fully under the IBC”
financialexpress.com
“While financial service providers are outside the purview of the IBC, where liquidation is envisaged, it would be prudent to appoint an insolvency professional with expertise in the regulations governing that sector.”
financialexpress.com
Sources
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