Non-Performing Assets (NPAS) and the Insolvency & Bankruptcy Code (IBC): Evaluating the Effectiveness of India's Legal Framework for Bad Debt Resolution

India’s Insolvency and Bankruptcy Code, introduced in 2016, brought together several outdated insolvency laws into one clear, time-bound system to tackle the growing problem of corporate distress and bad loans in the country. This research looks at how effectively the IBC has addressed the issue of non-performing assets in the banking sector. With the help of Indian and international literature as well as empirical data on recovery rates and resolution timelines, the analysis suggests that the IBC has led to faster resolutions and better returns for creditors compared to the pre-IBC, helping India climb the World Bank’s “resolving insolvency” rankings. However, there are still major challenges, including unclear legal rules (like guarantor liability and eligibility criteria), delays in the National Company Law Tribunal (NCLT) process, and unfair outcomes for different types of creditors. The research points out a gap in understanding how changes in IBC case law and unclear interpretations impact these outcomes. One important gap the study highlights is the lack of focus on how changing court decisions and unclear interpretations are affecting real-world outcomes as IBC case law evolves; these uncertain areas could weaken the code’s effectiveness and make it less predictable. Further, the study concludes that while the IBC is an important step forward, its success story is still a work in progress. To fully unlock its potential, the legal framework needs clear updates, especially regarding Sections 29A, 12A, and how personal guarantees are handled. Equally important are institutional changes, like increasing NCLT capacity and establishing clear, consistent procedures for case withdrawals and out-of-court settlements.