The Indian Bankruptcy Law Experience

Abstract

The Insolvency and Bankruptcy Code, 2016 (IBC) introduces a unied bankruptcy
code in India. Under IBC, the corporate insolvency resolution process aims to improve
the eciency of the bankruptcy code and strengthen creditor protection in an under-
developed credit market. In this paper we track evolution of the Indian bankruptcy
code and provide an overview of corporate insolvency resolution process under IBC.
Subsequently, we conduct a preliminary, empirical examination of the eect of IBC on
cost of debt and amount of debt, for BSE and NSE listed rms using panel data regression,
controlling for rm nancials and macro-economic covariates. We fail to nd evidence of
desired eect of improvement of rm credit characteristics with strengthening of creditor
rights. Our results are however in line with the liquidation bias observed by Vig (2013)
for the SARFESIA reform in India.

Keywords: Bankruptcy code, Credit market

JEL Classification: G28,G32,G33