Analysis of the suspension of the Insolvency & Bankruptcy Act
Post-Lockdown NPA Scenario
Context: Banking and NPA is an important topic under UPSC Mains for Economy and every year around 3-4 Questions come in Prelims related to Banking and terminologies. Hence, Insolvency and Bankruptcy Act, 2016 is important.
What is NPA?
Money or assets provided by banks to companies as loans sometimes remain unpaid by borrowers. This late or non-payment of loans is defined as Non-Performing
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021
IBC (Amendment) Ordinance, 2021
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 promulgated on 4th April, 2021 provides for pre-packaged insolvency resolution process (PPIRP) for corporate debtors classified as micro, small and medium enterprises.
The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Pre-packaged Insolvency Resolution Process) Regulations, 2021 (
Sudarshan Sen Committee for Asset Reconstruction Companies by RBI
Reserve Bank of India(RBI) has set up the Sudarshan Sen committee to review the working of Asset Reconstruction Companies (ARCs) Comprehensively.
About Asset Reconstruction Company (ARC):
Asset Reconstruction Company (ARC) is a specialized financial institution that buys the Non-Performing Assets (NPAs) from banks and financial institutions.
It helps banks in cleaning up their balance sheets.
Thus, it helps banks
Personal guarantors liable for corporate debt
Insolvency and Bankruptcy Code, 2016
It deals with debt default of companies and limited liability entities, partnership firms and individuals.
It was based on T K Vishwanathan Committee on Bankruptcy Law Reforms Committee (BLRC) in 2014.
It proposes a framework to ensure early detection of stress in a business, initation of the insolvency resolution process by the debtor, financial creditor or operational creditor; the liquidation of un
According to RBI data, the mega write-off exercise has enabled banks to reduce their non-performing assets (NPAs) or defaulted loans by Rs 10,09,510 crore ($123.86 billion) over the last five years.
However, banks have only been able to recover 13% of it so far.
Concerning the news
This massive write-off would have been enough to cover 61% of India's projected gross fiscal deficit of Rs 16.61 lakh crore in 2022-23.
As of March 2022, the banking sect