Conceptual Framework Of Non-Performing Assets (NPA)
- IJLLR Journal
- 52 minutes ago
- 2 min read
Sumit Negi, LLM. (Corporate Banking & Insurance Law), Amity Law School, Noida
Dr. Sheeba Ahad, Assistant Professor, Amity Law School, Noida
ABSTRACT
The banking sector serves as the lifeblood of a modern economy. Yet, for decades, the Indian financial system has grappled with the debilitating pathology of Non-Performing Assets (NPAs) and the "Twin Balance Sheet" problem. This dissertation provides a comprehensive legal assessment of the evolution, efficacy, and future trajectory of NPA resolution mechanisms in India, tracing the jurisprudential shift from the "debtor-in-possession" model of the Sick Industrial Companies Act (SICA) to the transformative "creditor- in-control" regime introduced by the Insolvency and Bankruptcy Code (IBC), 2016.
Using a Doctrinal Legal Research Methodology, this study analyses the constitutional validity and operational challenges of key statutes, specifically the SARFAESI Act, 2002, and the IBC, through landmark judicial pronouncements such as Mardia Chemicals and Innoventive Industries. The research critically evaluates the "Twin Implementation Deficit" of judicial delays and administrative inertia, noting that while the legislative framework has matured, the adjudicatory infrastructure remains a bottleneck.
Empirical analysis covering the period from 2010 to 2025 reveals that the Gross NPA ratio of Scheduled Commercial Banks has declined from a peak of 11.2% in 2018 to a multi-decadal low of approximately 2.2% in 2025. The study identifies the IBC as the dominant resolution channel, accounting for 52.4% of total recoveries in 2024-25, significantly outperforming legacy mechanisms like Debt Recovery Tribunals (DRTs). However, the research highlights a critical "two-speed" recovery system in which secured corporate debt is resolved efficiently, whereas unsecured retail debt lacks an expedited recovery mechanism.
Furthermore, this dissertation bridges a significant gap in the existing literature by examining the role of Technology Transfer and foreign direct investment (FDI) in asset resolution. It explores how global capital flows and the operationalisation of the National Asset Reconstruction Company Ltd (NARCL) have facilitated the cleanup of Public Sector Bank balance sheets. The study also investigates the integration of Artificial Intelligence and "Early Warning Systems" (EWS) in shifting the paradigm from reactive resolution to proactive prevention.
Keywords: Non-Performing Assets (NPA), Insolvency and Bankruptcy Code (IBC), SARFAESI, Judicial Delay, Technology Transfer, NARCL, Banking Law.
