Bad Loans, NPAs and the IBC
The Insolvency and Bankruptcy Code, 2016
IBC created a time-bound process where creditors take control of a defaulting company and try to revive or sell it, replacing earlier slow methods.
A new legal architecture.
Trigger
A default of ₹1 crore or more allows creditors to start proceedings.
Process
The company goes to the National Company Law Tribunal, and a resolution professional runs it under a committee of creditors.
Deadline
The process is meant to conclude in 330 days including extensions.
Outcome
Either a resolution plan is approved, or the company is liquidated.
A creditors' vote
Banks and other lenders vote on which bidder's plan to accept.
Assuming IBC always punishes the company
It often rescues the business.
Key takeaways
- IBC began in 2016.
- Creditors control the process.
- There are time limits.
- Outcomes are resolution or liquidation.
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