Effectiveness of the Insolvency and Bankruptcy Code in Resolving Non-Performing Assets Evidence from Indian Banks in Kerala

Abstract

The Insolvency and Bankruptcy Code (IBC) was introduced in India to strengthen corporate insolvency resolution and improve recovery outcomes for lenders. The present study examined the perceived effectiveness of the IBC in resolving Non-Performing Assets (NPAs) among Indian banks operating in Kerala. Primary data were collected from 200 banking officials drawn from key functions associated with stressed asset management, including credit, recovery, legal, and risk. A structured questionnaire was used to measure four outcome dimensions: perceived impact of IBC on NPA reduction, recovery effectiveness under IBC, timeliness and efficiency of IBC resolution, and perceived improvement in bank performance following IBC outcomes. The responses were coded and analysed using EDUSTAT. Descriptive statistics were used to summarise respondent profile and construct-level scores, and hypothesis testing was carried out using section-wise scale scores aligned to the study objectives. The results indicated that respondents reported favourable perceptions across all four effectiveness dimensions, with statistically significant support for the hypotheses. Timeliness was rated positively but comparatively lower than other dimensions, suggesting that procedural and institutional constraints continued to influence time-bound closure in practice. The study concluded that IBC was perceived as a credible and structured mechanism for NPA resolution in Kerala, with scope for further strengthening implementation efficiency.