Economics • Indian EconomyHard
Analyze the implications of the 'Insolvency and Bankruptcy Code (IBC), 2016'. What primary systemic problem was this legislation enacted to resolve?
A. To establish a time-bound, unified process for resolving corporate and individual insolvency, thereby addressing mounting non-performing assets in the banking sector✓ Correct Answer
B. To provide direct budgetary bailouts to loss-making public sector manufacturing enterprises
C. To nationalize private commercial banks facing temporary liquidity shortfalls
D. To regulate foreign portfolio investments and curb speculative trading in commodity derivatives
💡 Solution & Explanation
The Insolvency and Bankruptcy Code was enacted in 2016 to consolidate and amend laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. Prior to the IBC, resolution mechanisms were fragmented across multiple forums, leading to protracted delays and severe erosion of asset values, exacerbating non-performing asset pressures on banks. The National Company Law Tribunal adjudicates corporate insolvency cases under this framework.
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