The Union Ministry of Cooperation has taken cognisance of growing concerns within the cooperative banking sector over delays in debt recovery under the Insolvency and Bankruptcy Code (IBC), 2016, and has sought NABARD’s views on the matter for further action.
In a communication sent to the National Bank for Agriculture and Rural Development (NABARD), the Ministry of Cooperation flagged several issues being faced by banks during recovery proceedings under the IBC framework.
The Ministry specifically referred to concerns relating to prolonged moratorium periods, delays in disposal of cases by the National Company Law Tribunal (NCLT), repeated extensions in Corporate Insolvency Resolution Process (CIRP) timelines, and the consequential delay in recovery of dues by banks.
The matter was taken up by the Ministry after receiving a detailed representation from the Maharashtra State Cooperative Bank (MSCB), which highlighted what it described as serious operational and legal hurdles affecting lenders during insolvency proceedings.
In its letter to the Ministry, MSCB Administrator Vidyadhar V. Anaskar said banks are facing mounting difficulties due to lengthy moratorium periods that stall recovery actions and adversely impact the financial position of lenders.
The bank also expressed concern over cases where directors of corporate debtors file insolvency applications before the NCLT, allegedly complicating and delaying recovery proceedings initiated by banks.
MSCB further pointed out that delays in admission or disposal of cases by NCLT benches, coupled with repeated applications seeking extension of CIRP timelines by resolution professionals, are resulting in prolonged insolvency proceedings and erosion in asset value.
The cooperative bank urged the Ministry of Cooperation to intervene and recommend amendments to the IBC framework in consultation with the Ministry of Law and Justice. According to the bank, quicker resolution and limited procedural delays are essential to ensure effective recovery and preservation of asset value for creditors.
Taking note of the representation, the Ministry of Cooperation has now formally asked NABARD to provide its comments on the issues raised by MSCB for further processing of the matter.
