{"id":26976,"date":"2024-02-13T08:11:43","date_gmt":"2024-02-13T08:11:43","guid":{"rendered":"https:\/\/edukemy.com\/blog\/?p=26976"},"modified":"2024-02-13T08:11:45","modified_gmt":"2024-02-13T08:11:45","slug":"upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges","status":"publish","type":"post","link":"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/","title":{"rendered":"UPSC Mains &#8211; Explain the Insolvency and Bankruptcy Code (IBC) and its impact on the resolution of distressed assets in the Indian banking sector, including its effectiveness and challenges."},"content":{"rendered":"\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/edukemy.com\/refer-and-earn\" target=\"_blank\" rel=\"noreferrer noopener\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1280\" height=\"300\" src=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/09\/Attempt-our-Daily-Weekly-Current-Affairs-Quiz-now-10-1.png\" alt=\"\" class=\"wp-image-46428\" srcset=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/09\/Attempt-our-Daily-Weekly-Current-Affairs-Quiz-now-10-1.png 1280w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/09\/Attempt-our-Daily-Weekly-Current-Affairs-Quiz-now-10-1-1170x274.png 1170w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/09\/Attempt-our-Daily-Weekly-Current-Affairs-Quiz-now-10-1-585x137.png 585w\" sizes=\"(max-width: 1280px) 100vw, 1280px\" \/><\/a><figcaption><a href=\"https:\/\/edukemy.com\/refer-and-earn\" target=\"_blank\" rel=\"noopener\" title=\"\">Refer &amp; Earn NOW<\/a><\/figcaption><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<label for=\"ez-toc-cssicon-toggle-item-69e1b25212974\" class=\"ez-toc-cssicon-toggle-label\"><p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e1b25212974\"  \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#Introduction\" title=\"Introduction\">Introduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#Body\" title=\"Body:\">Body:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#The_Insolvency_and_Bankruptcy_Code_IBC\" title=\"The Insolvency and Bankruptcy Code (IBC):\">The Insolvency and Bankruptcy Code (IBC):<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#IBC_Transformation_in_the_Indian_Banking_Sector\" title=\"IBC Transformation in the Indian Banking Sector:\">IBC Transformation in the Indian Banking Sector:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#Effectiveness\" title=\"Effectiveness:\">Effectiveness:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#Challenges_for_IBC\" title=\"Challenges for IBC:\">Challenges for IBC:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#Conclusion\" title=\"Conclusion:\">Conclusion:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#In_case_you_still_have_your_doubts_contact_us_on_9811333901\" title=\"In case you still have your doubts, contact us on 9811333901.&nbsp;\">In case you still have your doubts, contact us on 9811333901.&nbsp;<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/edukemy.com\/blog\/upsc-mains-explain-the-insolvency-and-bankruptcy-code-ibc-and-its-impact-on-the-resolution-of-distressed-assets-in-the-indian-banking-sector-including-its-effectiveness-and-challenges\/#Visit_our_YouTube_Channel_%E2%80%93_here\" title=\"Visit our YouTube Channel \u2013&nbsp;here\">Visit our YouTube Channel \u2013&nbsp;here<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Enacted in 2016, the Insolvency and Bankruptcy Code (IBC) has undergone amendments, notably the Insolvency and Bankruptcy Code (Second Amendment) Bill of 2019. This legislation addresses non-performing assets (NPAs) and streamlines insolvency and bankruptcy proceedings, marking a significant transformation in the resolution of distressed assets within the Indian banking sector.<\/p>\n\n\n\n<p class=\"has-text-align-center\"><img decoding=\"async\" data-src=\"https:\/\/lh7-us.googleusercontent.com\/gllM3qVE6tb-g-gocVaMjK6C-kofZTQPtGCBU5JoiPpaUz2mc4DvKc2Tv8lOxgWGcWNE0mbbz1xOeVl4LdiLjE1LvGrgRk-89CntEdN9RMFvoaVlpANUaoxvJ-oRYcBfl5Ak6cNcMDC7qlHODQ-f8h4\" width=\"227\" height=\"265\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" style=\"--smush-placeholder-width: 227px; --smush-placeholder-aspect-ratio: 227\/265;\"><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Body\"><\/span>Body:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Insolvency_and_Bankruptcy_Code_IBC\"><\/span>The Insolvency and Bankruptcy Code (IBC):<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>Aims to consolidate and amend prevailing insolvency laws in India.<\/li><li>Strives to simplify and expedite insolvency and bankruptcy proceedings.<\/li><li>A central goal is to safeguard the interests of creditors, including stakeholders.<\/li><li>Emphasizes the timely revival of distressed companies.<\/li><li>Promotes entrepreneurship and provides essential relief to creditors.<\/li><li>Establishes the Insolvency and Bankruptcy Board of India.<\/li><li>Aims to maximize the value of assets owned by corporate entities.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"IBC_Transformation_in_the_Indian_Banking_Sector\"><\/span>IBC Transformation in the Indian Banking Sector:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>Improvement Over Earlier Laws: <\/strong>Replaces outdated laws such as the Sick Industrial Companies (Special Provisions) Act, 1985, and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.<\/li><li><strong>Pre-Packaged Insolvency Resolution: <\/strong>Introduced as an alternative for MSMEs, requiring an amount between Rs 10 lakh and Rs 1 crore to initiate.<\/li><li><strong>Speedier Resolution:<\/strong> Significantly reduces the average resolution time to 317 days, compared to the 4-6 years under previous laws.<\/li><li><strong>Higher Recoveries: <\/strong>Post-IBC, recoveries increase to 43% from the previous 22%.<\/li><li><strong>Proactive Debt Settlement: <\/strong>IBC incentivizes businesses to settle debts before insolvency, leading to many cases resolved without NCLT involvement.<\/li><li><strong>Increased CIRP Cases: <\/strong>A rise in admitted Corporate Insolvency Resolution Process (CIRP) cases.<\/li><li><strong>Case Outcomes:<\/strong> As of March 2019, 1858 cases were admitted, with various outcomes including appeals, settlements, withdrawals, liquidations, and approved resolution plans.<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Effectiveness\"><\/span>Effectiveness:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Approval by Financial Creditors:<\/strong> Requires approval by a minimum of 66% of unrelated financial creditors before submitting resolution plans to the NCLT.<\/li><li><strong>Minimum Default Amount:<\/strong> PIRP application initiated for defaults of at least one lakh rupees.<\/li><li><strong>Moratorium During PIRP:<\/strong> A moratorium granted to the debtor during the PIRP.<\/li><li><strong>Investor Interest:<\/strong> Attracts domestic and foreign investment in distressed assets, leading to a more organized resolution process.<\/li><li><strong>Reduction in Haircuts:<\/strong> Improves recovery rates compared to previous insolvency mechanisms.<\/li><li><strong>Operational Efficiency:<\/strong> Streamlines and consolidates various insolvency laws for a more efficient resolution process.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Challenges_for_IBC\"><\/span>Challenges for IBC:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>Limited Operational NCLT Benches:<\/strong> Non-operational or partially functional NCLT benches due to infrastructure and staff shortages.<\/li><li><strong>Low Approval Rate: <\/strong>Only about 15% of cases result in approved resolution plans.<\/li><li><strong>High Liquidations: <\/strong>Contradicts the IBC&#8217;s objective of resolving bankruptcy cases.<\/li><li><strong>Slow Judicial Process:<\/strong> India&#8217;s slow judicial process contributes to delays in resolution.<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The IBC has significantly transformed distressed asset resolution in the Indian banking sector, introducing efficiency and timeliness. While effective in many instances, challenges persist, including operational efficiency, approval rates, and legal complexities. Ongoing reforms and accumulated experience will continue shaping the IBC&#8217;s effectiveness in the future.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/edukemy.com\/free-resources-for-upsc?utm_source=Blog&amp;utm_medium=Banner&amp;utm_campaign=Resources\" target=\"_blank\" rel=\"noreferrer noopener\"><img decoding=\"async\" width=\"1280\" height=\"300\" data-src=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/18.png\" alt=\"\" class=\"wp-image-42398 lazyload\" data-srcset=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/18.png 1280w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/18-1170x274.png 1170w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/18-585x137.png 585w\" data-sizes=\"(max-width: 1280px) 100vw, 1280px\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" style=\"--smush-placeholder-width: 1280px; --smush-placeholder-aspect-ratio: 1280\/300;\" \/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_case_you_still_have_your_doubts_contact_us_on_9811333901\"><\/span><strong>In case you still have your doubts, contact us on 9811333901.<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For UPSC Prelims Resources,&nbsp;<a href=\"https:\/\/edukemy.com\/upsc-cse-prelims-resource-centre\" target=\"_blank\" rel=\"noreferrer noopener\">Click here<\/a><\/p>\n\n\n\n<p>For Daily Updates and Study Material:<\/p>\n\n\n\n<p>Join our Telegram Channel \u2013&nbsp;<a href=\"https:\/\/t.me\/WithEdukemy4IAS\" target=\"_blank\" rel=\"noreferrer noopener\">Edukemy for IAS<\/a><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>1. Learn through Videos \u2013&nbsp;<a href=\"https:\/\/bit.ly\/3vOD8sU\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>2. Be Exam Ready by Practicing Daily MCQs \u2013&nbsp;<a href=\"https:\/\/bit.ly\/3Q9z2nF\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>3. Daily Newsletter \u2013 Get all your Current Affairs Covered \u2013&nbsp;<a href=\"https:\/\/bit.ly\/3bE2y5J\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>4. Mains Answer Writing Practice \u2013&nbsp;<a href=\"https:\/\/bit.ly\/3mZuVxl\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Visit_our_YouTube_Channel_%E2%80%93_here\"><\/span>Visit our YouTube Channel \u2013&nbsp;<a href=\"https:\/\/www.youtube.com\/@ShabbirsEduKemyforIAS\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n","protected":false},"excerpt":{"rendered":"<p>Enacted in 2016, the Insolvency and Bankruptcy Code (IBC) has undergone amendments, notably the Insolvency and Bankruptcy Code (Second Amendment) Bill of 2019.<\/p>\n","protected":false},"author":17,"featured_media":26525,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[1643],"tags":[232,515,230],"class_list":["post-26976","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-upsc-mains","tag-upsc","tag-upsc-cse","tag-upsc-mains"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/26976","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/comments?post=26976"}],"version-history":[{"count":1,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/26976\/revisions"}],"predecessor-version":[{"id":26983,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/26976\/revisions\/26983"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/media\/26525"}],"wp:attachment":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/media?parent=26976"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/categories?post=26976"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/tags?post=26976"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}