GS 3 – Economy
Enacted: 2016, consolidating and amending laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals.
- Objective:
- Provide time-bound (180–270 days) resolution process.
- Improve ease of doing business and credit culture.
- Balance interests of creditors and debtors.
- Institutional Framework:
- Insolvency and Bankruptcy Board of India (IBBI): Regulator.
- National Company Law Tribunal (NCLT): Adjudicating authority for companies/LLPs.
- Debt Recovery Tribunal (DRT): For individuals/partnerships.
- Insolvency Professionals (IPs): Conduct resolution process.
- Information Utilities (IUs): Maintain financial information.
- Process: Creditors file insolvency → Interim Resolution Professional → Committee of Creditors (CoC) formed → Resolution Plan approved or liquidation.
- Impact:
- Strengthened creditor confidence.
- Improved recovery rates (though below global average).
- Reduced NPAs in banking sector.
- Challenges: Delays beyond prescribed time limit, capacity constraints in NCLTs, low resolution value.