IDRCL Completes First Insolvency Resolutions, Distributes ₹330 Crore to Banks

India Debt Resolution Company Ltd (IDRCL), the operational arm of the government-backed bad bank framework, has completed its first successful insolvency resolutions since beginning operations in 2022. 

The resolutions involved two stressed companies and resulted in the distribution of nearly ₹330 crore to creditor banks, marking an initial milestone in India’s efforts to address legacy non-performing assets through a structured recovery mechanism.

First Recoveries Since Operational Launch

IDRCL, which manages asset resolution on behalf of National Asset Reconstruction Company Ltd (NARCL), concluded insolvency proceedings for two companies Metenere Ltd and Helios Photo Voltaic. 

These mark the first completed recoveries under the bad bank structure established to resolve difficult distressed assets accumulated within the banking system.

The recoveries were achieved through court-approved resolution plans overseen by the National Company Law Tribunal (NCLT).

Resolution of Metenere Ltd

The metals company Metenere Ltd was resolved through a ₹295 crore plan submitted by Orissa Metaliks Pvt Ltd. Following completion of procedural interventions and approvals, security receipts issued earlier to banks were redeemed.

Approximately ₹251 crore was distributed among lenders as part of the resolution proceeds. Despite the recovery, lenders absorbed significant losses as the total admitted debt in the account had been substantially higher, reflecting a steep haircut.

Helios Photo Voltaic Case Outcome

A separate resolution involving solar components manufacturer Helios Photo Voltaic resulted in gross recoveries of about ₹92 crore after approval of a plan submitted by OCL Iron & Steel.

Banks received around ₹78 crore following redemption of security receipts linked to the asset. Similar to the Metenere case, the recovery represented only a small portion of the original debt exposure due to the company’s financial deterioration prior to acquisition by the bad bank.

Structure of the Bad Bank Mechanism

NARCL had acquired the stressed loans under a 15:85 structure, where lenders received 15% cash upfront while the remaining value was represented through government-backed security receipts. These receipts are redeemed once recoveries are realised through resolution or asset sales.

The model aims to transfer complex non-performing assets from bank balance sheets while allowing specialised resolution entities to manage legal and operational challenges.

Impact on Lending Banks

Public sector banks emerged as primary beneficiaries of the distributions. In the Metenere resolution, State Bank of India, Bank of Baroda and Punjab National Bank accounted for a significant share of recoveries based on their lending exposure.

In the Helios case, Punjab National Bank and State Bank of India received the majority of proceeds due to their dominant creditor positions.

Challenges in Asset Resolution

Both cases involved prolonged legal and procedural hurdles. Resolution professionals had to address litigation issues and regulatory complications, including court stays and restarted insolvency processes. These complexities highlight the nature of assets transferred to the bad bank typically cases where earlier recovery attempts had stalled.

While recoveries remained modest relative to total debt, the resolutions demonstrated progress in unlocking value from distressed accounts considered difficult to resolve through conventional banking channels.

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Conclusion

The completion of these two insolvency cases represents an early operational step for India’s bad bank framework rather than a large-scale financial turnaround. The recoveries underline both the potential and limitations of resolving deeply stressed assets, as lenders continue to balance recovery outcomes against substantial haircuts in legacy non-performing loans.

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