The Evolving Resolution Of Stressed Assets

The banking sector has been under tremendous stress in the past few years due to the increasing number of non-performing assets (NPA) caused among other things by the absence of a comprehensive bankruptcy regime. In 2016, the Insolvency and Bankruptcy Code, 2016, was enacted to provide a comprehensive framework for the resolution of NPAs. The recovery rate in 94 cases resolved through the code by fiscal year 2019 is 43%, compared to 26.5% under the previous regime. According to the World Bank, the code has helped India move up to 63rd place in its 2020 ease of doing business rankings. While the results are encouraging, unfamiliarity with the new law, slippage of timelines, frivolous litigation and a lack of infrastructure have hindered the implementation of the code.