A Review Of The Impact Of The Insolvency And Bankruptcy Code On Recovery Efficiency In Indian Public Sector Banks
- IJLLR Journal
- May 20
- 2 min read
Priyanshi Srivastava, Research Scholar, Amity Law School, Amity University, Lucknow
Dr. Jyoti Yadav, Associate Professor, Amity Law School, Amity University, Lucknow
ABSTRACT
The Insolvency and Bankruptcy Code (IBC), 2016, marked a watershed changeinthecountry'slegalregimetoresolvestressedassets, especiallyfor public sector banks (PSBs) which have been saddled with an extremely high share of non-performing assets (NPAs). Abstract This paper evaluates the effectiveness of Insolvency and Bankruptcy Code (IBC) on recovery in Public Sector Banks (PSBs), by undertaking a comparative study of control adjusted pre-and post-regime effects, incorporating doctrinal analysis over IBC provisions & jurisprudence along with empirical assessment based upon recovery patterns through data collated from Reserve bank India (RBI). Insolvency bankruptcy board India (IBBI)/Ministry of finance. The study starts by charting the evolution and limitations of pre-IBC regimes (the 1993 Recovery of Debts and Bankruptcy Act, RDB) & the 2002 Securitization And Reconstruction Of Financial Assets And Enforcement Of Security Interest SARFAESI but contrasts these with an expedited creditor-focus corporate insolvency resolution regime set under IBC. The first published evidence of an examination into how gross non performing asset (NPA) ratios, recovery rates and resolution outcomes for public sector banks (PSBs), have evolved prior to 2016 -by Rishita Pereira- exhibit PSB NPA ratios declining after the peaks seen during crisis era prime up to fiscal year ending March 2025 while Insolvency and Bankruptcy Code channels with results significantly superior than preceding frameworks glean higher recoveries. The outcomes suggest that although the IBC has remarkably augmented recovery efficiency and mitigated moral hazard, underlying lags in action, haircuts, and NCLT capacity constraints countermand its potentially reformative nature. The checklist still lists policy prescriptions targeted at institutional improvements in the Code, time frames & information dissemination and risk management reforms at PSB level that will further help cementing the initial positives of IBC driven resolution framework. Level Playing Field for Non-Public Sector Banks.
Keywords: Non-Performing Assets, Public Sector Banks, NPA Recovery Efficiency, SARFAESI, NCLT, Banking Legislation
