Akash Dixit, Shubham Saini & Abhishek Bhatt, LLM, National Law University, Delhi
ABSTRACT
The government recently announced the establishment of an Asset Reconstruction Company ('ARC') and an Asset Management Company ('AMC'), sometimes known as a "bad bank," to deal with substantial cases of non-performing assets at banks and financial institutions. The Insolvency and Bankruptcy Board of India (IBBI) has also proposed a Pre-Packaged Insolvency Resolution Process, which would legalise an informal settlement between creditors and debtors while considerably shortening the procedures of the standard insolvency process. In this context, despite the fact that the Insolvency and Bankruptcy Code (IBC) is gradually finding its footing, the future roadmap of the IBC is ambiguous.
The IBC's inability to achieve fast, despite all of its goal, process, and codified framework, is also one of the key drivers for the Bad Bank. The general structure is expected to be the ARC taking over the stressed asset from the lenders and handing it over to the AMC to manage in order to enhance value and prevent value erosion while looking for potential investors and buyers for an ultimate sale. This would clearly imply introducing an exemption to the IBC's applicability in circumstances handled by the ARC and AMC.
In addition to that, this research paper will proceed with a research question: Whether or not bad banks will be helpful in reducing NPA’s of banks. Whether or not the IBC was a successful system for resolving insolvency.Why did the government feel the need for bad banks? Whether or not the establishment of a bad bank will strengthen the IBC.
Furthermore, this research will try to address the shortcomings of the IBC and why the government felt the need for the bad bank. Is Bad Bank capable of filling the gaps left by IBC, and what is the experience of different countries with the Bad Bank system?
Keywords: bad bank, IBC, insolvency, non-performing assets.
