Page 43 - Banking Finance November 2024

ARTICLE

The Role and Impact

of the Insolvency and

Bankruptcy Code

(IBC) in NPA

Dr. Dileep Kumar S. D.
Recovery Assistant Professor and Coordinator

PG Department of Commerce
PES Institute of Advanced
Management Studies
Shivamogga, Karnataka

The Indian banking sector is on the cusp of a transformation. FinTech startups are revolutionizing
the industry with innovative products, seamless digital experiences, and a culture of agility. But
this disruption extends beyond just technology.

Abstract:
Indian banks, especially grappling with the mounting challenge of Non-Performing Assets (NPAs) within Scheduled
Commercial Banks (SCBs), are experiencing a significant downturn in their capacity for credit recycling, resulting in
reduced business opportunities and declining profits. However, various factors contributing to the severity of NPA problem
are including macro-economic, political, and internal factors, emphasizing the complexity of the issue. With this back-
ground, the present study puts an effort to look at the role of the Insolvency and Bankruptcy Code (IBC) in NPA
recovery and also showcasing its significance in resolving insolvency and maximizing creditor recovery.

Introduction: categorized as scheduled and non-scheduled, encompass
private, public, branches of foreign banks and regional
The vitality of a country's economy lies at the core of its
growth and prosperity, with various factors contributing rural banks, collectively providing to the diverse finan-
to its development. Among these factors, the banking cial needs of the populace.
sector emerges as a pivotal force, facilitating the expan-
Central to the functions of these banks is the mobiliza-
sion and stability of the national economy. Through the
efficient allocation of savings into productive ventures, the tion of deposits and the provision of loans, pivotal for
banking system assumes a vital function in nurturing stimulating economic activity. While deposit-taking car-
ries minimal risk, as banks are obligated to refund pub-
economic growth and development. In India, the bank-
ing structure comprises commercial banks and co-opera- lic funds upon request, lending involves inherent risks,
tive banks, each playing distinct yet complementary roles with the possibility of borrowers defaulting on repayments,
leading to the accumulation of non-performing assets
in the financial ecosystem. Commercial banks, further

38 | 2024 | NOVEMBER | BANKING FINANCE