Effectiveness of the Insolvency and Bankruptcy Code in resolving NPA’s in Indian Banking Sector

Abstract

The rising burden of Non-Performing Assets (NPAs) in the Indian banking sector has posed a serious threat to financial stability and credit flow in the economy. In response, the Government of India introduced the Insolvency and Bankruptcy Code (IBC), 2016, to provide a time-bound and effective mechanism for insolvency resolution. This research paper examines the effectiveness of the IBC in resolving NPAs in the Indian banking system. Drawing upon doctrinal analysis of legal texts, landmark judgments, and empirical data from regulatory bodies such as the RBI and IBBI, the study evaluates the impact of the Code on recovery rates, resolution timelines, and institutional efficiency. It further explores the challenges faced in implementation, such as procedural delays, judicial bottlenecks, and misuse of the process. The findings suggest that while the IBC has led to significant improvements in debt resolution, persistent gaps remain. The paper concludes by recommending legal and institutional reforms to strengthen the Code’s effectiveness and ensure sustainable financial recovery in the banking sector.