The Pre-packaged Insolvency Resolution Process (PIRP) has not found many takers as bank officials are wary of taking voluntary haircuts that may be questioned later.

It was notified more than a year ago but so far only two insolvency cases have been initiated under this regime, available exclusively to micro, small, and medium enterprises (MSMEs).

“Bankers are not comfortable taking haircuts in pre-packaged insolvency since they are concerned that such decisions may come into question at a later stage,” said Manoj Kumar, partner, Corporate Professionals. “So they are processing even potential PIRP cases through the regular corporate insolvency process, which typically puts more pressure on the business of MSMEs.”

Insolvency experts say PIRP will need a push from both the government and the Reserve Bank of India (RBI) to gain wider acceptance.


The government introduced the PIRP process through an ordinance in April 2021, setting up an alternative process to speed up bankruptcy resolution and ensure business continuity for MSMEs. Under the PIRP process, the defaulting borrower continues to exercise management control while a resolution professional monitors the resolution, ensuring business continuity for the MSME.

In contrast, under the normal corporate insolvency resolution process (CIRP), after default, the debtor company is put under a moratorium and a resolution professional takes over the company and manages it in coordination with creditors.

Only two companies-Ahmedabad-based GCCL Infrastructure & Projects and Delhi-based Loonland Developers-have opted for PIRP resolution.

Resolution specialists say public sector bankers are more hesitant as any allegations of impropriety could lead to vigilance investigations.

Indeed, in many recent cases, debtors have levelled allegations against decisions taken by bankers and resolution professionals under the Insolvency and Bankruptcy Code (IBC).

Under PIRP, lenders and debtors look for suitors ready to infuse funds and handle debt through an initially informal process. Once a suitor is identified, lenders negotiate the deal and then approach the National Company Law Tribunal (NCLT) for final approval.

“Financial institutions are growingly hesitant at the mere perception of the consultative process, i.e., voluntarily taking a potential haircut in a PIRP instead of accepting the same as a so-called last resort in a CIRP and are thus avoiding the former altogether,” said Ruby Singh Ahuja, senior partner, Karanjawala & Co.

One of the key industry suggestions is that the Reserve Bank of India (RBI), in consultation with the government, could shortlist a group of debtor companies and put them mandatorily under PIRP.

When the IBC was first introduced, the RBI released a list of 12 entities for CIRP resolution. “The RBI can similarly earmark certain MSMEs and give the banks a mandate to bring about a resolution, if the same is possible, through PIRP,” Ahuja said.

Globally, PIRP is considered a viable alternative to the regular insolvency process not just for small industries but even large corporate defaults.

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