Debt Recovery Rate Stuck at ~30 percent while Timelines Continue to Increase

• After slowing in the pandemic period of FY21 and FY22, the number of insolvency cases referred has increased by 20% y-o-y in Q1FY24. However, despite the increase, the number of cases admitted to the insolvency process continued to be lower compared to earlier quarters in FY20. The distribution of cases across sectors continues to remain broadly similar, compared to earlier periods given the extended resolution timelines.
• The overall recovery rate till Q1FY24 was 31.62% implying a haircut of approximately 68%. The cumulative recovery rate has been on a downtrend, decreasing from 43% in Q1FY20 and 32.9% in Q4FY22 as larger resolutions have already been executed and a significant number of liquidated cases were either BIFR cases and/or defunct with high-resolution time. Further, the average time taken for resolution or liquidation continues to increase for operational creditors (OCs) and financial creditors (FCs) during the June quarter.

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