S&P Ups Jurisdiction Ranking Assessment For India's Insolvency Regime

S&P Global Ratings on Wednesday revised up its jurisdiction ranking assessment for India's insolvency regime on improved creditor-friendliness of India's bankruptcy resolution framework.

S&P said the Insolvency and Bankruptcy Code (IBC) has strengthened credit discipline and tilted the resolution process in favour of creditors, with promoters potentially risking losing control of their business, unlike under earlier resolution regimes.

S&P Global Ratings today revised up its jurisdiction ranking assessment for India's insolvency regime to Group B from Group C, the agency said in a statement.

'The change follows an upward revision of our assessment of the creditor-friendliness of India's bankruptcy resolution framework to medium from weak,' it said.

Contributing to this reassessment are a continuing record of successful creditor-led resolutions under IBC.

These resolutions demonstrate improved timeliness and recovery rates. Average recovery values have improved to more than 30%, from 15-20% under the previous bankruptcy regime.

The IBC has reduced the average resolution time for bad loans to about two years, down from six to eight years.

S&P, however, said India's resolution regime still lags those of more established Group A and some Group B jurisdictions. Average recovery rates of about 30 per cent are comparatively low.

It also flagged that despite a reported time to resolution of about two years, unpredictability remains with delays often stemming from initiating resolution and implementation plans, frequently due to legal challenges by other stakeholders.

However, recent Supreme Court rulings, including on the Bhushan Power and Steel Ltd acquisition, reinforce protection of creditor rights, even with these delays, S&P said.

A jurisdiction ranking assessment is an indicator of the relative degree of protection that a country's insolvency laws and practices afford to creditors' interests, and of the predictability of those proceedings.

S&P classifies insolvency regimes into three groups, which in turn form the jurisdiction ranking assessments-- Group A, Group B, and Group C.