Insolvency and Bankruptcy Code

The Insolvency and Bankruptcy Code is a consolidated legal framework providing a time-bound, creditor-driven process for resolving corporate insolvency and facilitating the orderly exit of unviable enterprises.

Under Indian Economy

• It fundamentally altered India's corporate credit culture by shifting from a debtor-in-possession system to a creditor-in-control framework.
• It improves capital reallocation across the economy by facilitating time-bound reorganization or liquidation of stressed corporate entities.
• It established a specialized adjudicatory and regulatory architecture to resolve commercial distress outside traditional civil court processes.

In General Studies Paper III, UPSC tests the Code as a critical structural reform addressing non-performing assets and ease of exit for capital. Questions frequently evaluate execution challenges such as procedural delays in the adjudicating authority, high haircuts taken by financial creditors, and the balance between liquidation and business recovery. Candidates are required to analyze recent policy innovations like pre-packaged insolvency resolution processes and measures needed to enhance institutional capacity.