Corporate insolvency frameworks play a critical role in maintaining financial stability by enabling efficient resolution of distressed firms and facilitating recovery for creditors. Prior to 2016, India’s insolvency regime was characterized by fragmented legislation, overlapping institutional jurisdictions, and prolonged resolution processes, which significantly limited the ability of banks to recover distressed loans. These structural weaknesses contributed to the rapid accumulation of non-performing assets within the banking sector. The enactment of the Insolvency and Bankruptcy Code, 2016 introduced a consolidated and time-bound framework for resolving corporate insolvency with the objective of improving creditor recoveries and strengthening credit discipline. This paper provides a decade-long assessment of the impact of the Insolvency and Bankruptcy Code on India’s banking sector during the period 2016–2025. The study examines the relationship between corporate insolvency regulation and financial stability by analysing trends in non-performing assets, recovery outcomes, and insolvency resolution proceedings. It further evaluates the role of judicial interpretation in shaping insolvency jurisprudence and identifies persistent institutional challenges affecting the effectiveness of the insolvency framework. The analysis suggests that the Code has significantly improved the legal infrastructure for resolving corporate distress and contributed to strengthening the stability of the banking sector. However, delays in resolution proceedings, institutional capacity constraints, and concerns regarding creditor recoveries continue to pose challenges. The paper concludes that continued regulatory and institutional reforms are essential to ensure that the insolvency regime remains an effective instrument for promoting financial stability and efficient credit markets in India.
Dr. Rohit Tiwari (Sun,) studied this question.