Economics • Indian EconomyHard
What is the primary operational mechanism and economic objective of the 'Insolvency and Bankruptcy Code' (IBC), 2016 in India?
A. Establishing a time-bound market-driven resolution process for distressed corporate debtors to maximize asset value and balance creditor interests✓ Correct Answer
B. Empowering the central government to nationalize failing manufacturing corporations without judicial oversight
C. Providing government guarantees for all retail bondholders against corporate default and market losses
D. Liquidating commercial banks immediately upon breaching minimum capital adequacy thresholds
💡 Solution & Explanation
The Insolvency and Bankruptcy Code, 2016 consolidated and amended the legal framework for reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner, aiming to maximize asset value, promote entrepreneurship, and balance the interests of all stakeholders. It replaced a fragmented legal architecture with the National Company Law Tribunal acting as the adjudicating authority. The resolution process prioritizes reorganization through resolution plans, moving to liquidation only if revival fails. This mechanism has significantly improved credit discipline and the recovery of stressed assets in the banking sector.
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