Insolvency and Bankruptcy Code
Also: IBC, Insolvency and Bankruptcy Code, 2016, insolvency code
Background and evolution
The Bankruptcy Law Reforms Committee, chaired by T. K. Viswanathan, drafted the framework in 2015. The law was passed at a time when public sector banks carried very high levels of bad loans, and the RBI used the IBC to push banks to refer large defaulters, including the first list of twelve big accounts in 2017.
Before the IBC, a creditor trying to recover money from a failing company faced a maze of laws, including the Sick Industrial Companies Act and its Board for Industrial and Financial Reconstruction, the SARFAESI Act and debt recovery tribunals. Cases dragged on for years, assets lost value, and promoters often remained in control while defaulting. The World Bank's Doing Business data placed India poorly on resolving insolvency, with recovery rates of around a quarter of the debt and timelines of over four years.
The IBC introduced a "creditor-in-control" model: once a case is admitted, the company's board is suspended and an insolvency professional manages it, while creditors decide whether to accept a resolution plan or liquidate. This page focuses on the IBC as a change in the balance of power between borrowers and lenders and on the lessons from its first decade, while the wider banking context of NPAs is covered in the linked lesson.
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Last reviewed: 23 October 2026 · Original UPSCPrep.in content.