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Discuss the impact of Insolvency and Bankruptcy Code (IBC) on loan recovery and also suggest remedial measures for better implementation of the Code.

Topic:  Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

3. Discuss the impact of Insolvency and Bankruptcy Code (IBC) on loan recovery and also suggest remedial measures for better implementation of the Code.(250 words)

Reference: Live Mint

Why this question:

After the Insolvency and Bankruptcy Code (IBC) became law in May 2016, the ecosystem of corporate insolvency resolution process (CIRP) was put in place by the year-end. As of December 2019, the system had been in existence for three years.

Key demand of the question:

The answer must discuss about the performance of IBC since its inception and Suggest remedial measures for better implementation of the Code.

Directive:

Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction:

Briefly explain about the loan recoveries in the past and those of the present.

Body:

Quote facts and highlight how good have been the loan recoveries. Before the passing of IBC it took an average of 4.3 years to resolve insolvency and recovery rate was 25.9% as compared to developed countries where recovery rate was 72%. Discuss the salient features of the IBC. Highlight the positive impact of the code. The challenges involved; The Section 29A of the Code has debarred certain entities thus brought down competition in bidding thereby resulting into reduced recovery, Most of the cases before the NCLT have failed to adhere to strict timeline of 180 days resulting in losses for the creditors etc.

Conclusion:

Conclude that need for quality resolution professionals, capacity building of NCLT in terms of creation of more benches and manpower. Moreover, once a resolution plan has been approved no objection should be entertained. The principal stakeholders in insolvencies such as NCLT, Resolution Professionals, and Committee of Creditors need to expedite resolution process.