Understand the difference between traditional recovery laws and IBC, 2016, and how India’s insolvency framework shifted from recovery to resolution
Introduction
Recovery of loans and management of stressed assets have always been major challenges for banks and financial institutions. Whenever a borrower fails to repay loan obligations and the account becomes a Non-Performing Asset (NPA), lenders are required to take suitable legal action to recover their dues.
Before the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), banks primarily relied upon traditional recovery mechanisms such as civil suits, Debt Recovery Tribunals (DRTs), the SARFAESI Act, and enforcement of guarantees. While these laws provided…