[PAPER ID: 85709] EVALUATING THE EFFECTIVENESS OF THE INSOLVENCY AND BANKRUPTCY CODE (IBC) IN MANAGING NONPERFORMING ASSETS (NPAS) IN INDIA: CHALLENGES AND OUTCOMES

ARTICLE INFO: Date of Submission: Oct 26, 2025, Revised: Nov 21, 2025, Accepted: Dec 01, 2025, DOI URL: https://doi.org/10.56815/ijmrr.v4i4.2025.65-85, HOW TO CITE: Pradeep Kumar Damaraju, Rajbir Kumar (2025). Evaluating the Effectiveness of the Insolvency and Bankruptcy Code (Ibc) in Managing Non-Performing Assets (Npas) in India: Challenges and Outcomes. International Journal of Multidisciplinary Research & Reviews, 4(4), 65-85.

Abstract

The enactment of the Insolvency and Bankruptcy Code (IBC) in 2016 marked a paradigm shift in India’s approach toward financial discipline, asset reconstruction, and corporate insolvency resolution. Conceived as a comprehensive reform to address the twin challenges of burgeoning nonperforming assets (NPAs) and inefficiencies in the erstwhile recovery mechanisms, the IBC has been heralded as a transformational legal framework. This study undertakes a holistic evaluation of the effectiveness of the IBC in managing NPAs within the Indian banking sector, critically examining its institutional architecture, operational efficiency, and impact on financial stability. The findings suggest that while the IBC has significantly augmented creditor empowerment, instilled greater transparency in debt resolution, and fostered a credit-responsible corporate culture, its delivery has been uneven. Although recovery rates under the Corporate Insolvency Resolution Process (CIRP) have shown measurable improvement compared to earlier mechanisms such as SARFAESI and Debt Recovery Tribunals, systemic challenges persist. Judicial congestion, capacity deficits in the National Company Law Tribunal (NCLT), and strategic litigations by defaulting promoters have contributed to protracted timelines, often diluting the Code’s fundamental objective of timebound resolution. Moreover, the tension between value maximization and creditor recoverability has surfaced in several high-profile cases, underscoring the delicate balance between commercial viability and statutory compliance. By engaging with empirical evidence, key judicial precedents, and comparative insights from global insolvency regimes, this paper highlights both the transformative outcomes and the inherent limitations of the IBC in its present form. The analysis underscores the urgent need for institutional strengthening, harmonization of regulatory frameworks, and adoption of innovative debt-resolution practices to enhance the efficacy of the Code. The study argues that the IBC, though not without shortcomings, has laid the foundation for a more resilient financial ecosystem in India by redefining insolvency jurisprudence and instilling market discipline. Its long-term success, however, will depend on strategic recalibrations, continuous policy refinements, and robust capacity-building measures aimed at evolving it into a more agile and inclusive framework for managing distressed assets.