What are the key objectives of the Insolvency and Bankruptcy Code (IBC), 2016 ? To what extent has it been successful in achieving them?

Key objectives.

1. Ensuring effective management of NPA accounts for better regaining of capital.
2. Differentiate between "wilful default" and NPA due to threats to the functioning of capital.
3. Ensure "Asset Reconstruction Company" for letting the bank focus on its lending and administrative function. → Ensure a healthy balance sheet.
4. Quicker and timely resolution of NPAs help in freeing capital for further investment.
5. Earlier there were various schemes which led to ambiguity such as SARFAESI Act 2002. → IBC 2016 rationalised and simplified the procedure.
6. Harnessing digital technology for the process of asset reconstruction.

Potential success of IBC 2016

1. Reduction in Net NPA and Gross NPA in the economy. → Eg: Gross NPA was close to 2% in FY 2024-25.
2. Effective management through National Asset Reconstruction Company Ltd. (NARCL).
3. Provided a simple mechanism, thus positive impact on bank's health.
4. Ensure quick recovery of capital.

Yet there are limitations to IBC 2016.

1. There are still delays in timely recovery of asset.
2. No proper trained staff or separate cadre of officials for ARC.
3. Lack infrastructure such as office, computer desks etc.
4. Issues of collusive corruption and red-tapism.