Revamping the IBC

Faster insolvency resolution is crucial

The enactment of the Insolvency and Bankruptcy Code (IBC) in 2016 was expected to fill an important gap in the Indian economy and was dubbed one of the biggest reforms in recent decades. The basic idea was to resolve corporate insolvencies in a time-bound manner and enable a quick reallocation of productive capital. All previous mechanisms of resolving such cases had proved inefficient. The government on its part also kept making changes to the Code to address shortcomings. A separate framework, for instance, was notified in 2019 for financial service providers. In addition to other changes, a framework was introduced in 2021 to address insolvencies in small and medium enterprises. However, the overall outcome has not been as desired. The resolution process is taking more time and recovery at aggregate level is not very different from legacy mechanisms.

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