Indian banks are intensifying efforts to unwind nearly ₹3.97 trillion worth of suspect pre-insolvency transactions, according to a recent report. Insolvency and Bankruptcy Board of India data cited by the report indicate that lenders are targeting preferential, fraudulent, undervalued or extortionate (PUFE) transactions executed by promoters or related parties just before a company entered the resolution process under the Insolvency and Bankruptcy Code (IBC).
Key Highlights
- Banks are pursuing reversal of nearly ₹4 trillion in suspicious pre-IBC transactions flagged during insolvency.
- Recovery remains slow as legal delays, asset erosion, and complex investigations hinder progress in tribunals.
The scale of these avoidance claims now rivals the total recoveries made by lenders via corporate-resolution under the IBC since 2016 — which stand at approximately ₹3.99 trillion. In the September quarter alone, 128 new applications were filed seeking reversal of transactions worth around ₹7,200 crore, and since September 2024, claims totalling more than ₹20,700 crore have been lodged.
Despite this uptick in filings, actual recoveries remain modest. As of March 2025, creditors retrieved only ₹7,931 crore from 368 cases, even though 1,396 applications were pending before tribunals. The number of filings climbed to 1,570 by end-September.
Under the IBC framework, resolution professionals are required to examine a debtor’s financial transactions during the statutory look-back period and flag any PUFE dealings to the National Company Law Tribunal (NCLT). These transactions often involve asset stripping, fund diversion, preferential treatment of certain creditors, or entering into onerous financing arrangements just prior to insolvency.
Key challenges remain in reversing these deals. Experts point out that many of the assets targeted in PUFE cases have already disappeared or depreciated by the time insolvency is admitted, making recovery difficult. Additionally, the NCLT’s limited capacity further slows down the disposal of these cases, with many stretching out over several years.
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In view of these issues, the government, in coordination with the IBBI, is exploring ways to strengthen scrutiny of pre-insolvency transactions, enhance transparency and improve identification of avoidance transactions to protect creditor interests.
Overall, the push by banks to reverse these nearly ₹4 trillion in questionable transactions underscores the growing focus on clawing back losses for creditors and tightening oversight in India’s corporate insolvency regime.
