India’s 1991 New Economic Policy (LPG reforms) fuelled banking sector growth, but over time banks accumulated massive Non-Performing Assets (NPAs). Existing recovery laws left banks in years of slow, ineffective litigation. legalserviceindia
The Insolvency and Bankruptcy Code (IBC), 2016 was passed by both houses of Parliament in May 2016 and received presidential assent on 28 May 2016. legalserviceindia It became India’s biggest economic reform since 1991 by creating a single, unified insolvency framework.
Key highlights:
- Covers individuals, firms, LLPs, and companies — resolution can be initiated by either the debtor or creditors legalserviceindia
- Two tribunals oversee the process: NCLT (companies/LLPs) and Debt Recovery Tribunal (individuals/firms), with strict time-bound resolution limits legalserviceindia
- Uniquely prioritises revival of the debtor over liquidation legalserviceindia
- Helped resolve the RBI’s “Dirty Dozen” — 12 major stressed accounts like Bhushan Steel and Electrosteel — and contributed to a decline in gross NPAs from ₹9.62 lakh crore in March 2018 legalserviceindia
In short, the IBC gave banks a faster, structured, and more effective tool to tackle bad loans and revive stressed businesses.
