THE IMPACT OF IBC (INSOLVENCY AND BANKRUPTCY CODE) 2016 ON THE STOCK PRICES OF SELECTED INDIAN BANKS - AN EVENT STUDY

Abstract

Indian banks have faced tough times in recovering the dues on time forcing them to increase provisioning at the cost of their profits as the bad loans get worse. The Indian government in July 2019 cleared seven amendments to the IBC seeking to put in place a 330 day deadline for corporate resolution process, a credit positive for Indian banks because it will reduce resolution timelines. These proposed amendments aim to improve the IBCs effectiveness and have credit positive implication for Indian banks. The amendment will facilitate the resolution of real estate projects. IBC (2016) is one of the most ground-breaking laws enacted in the country in recent times that subsumed the existing Sick Industrial Companies Act (SICA), revamped the Debt Recovery Tribunals (DRT) and has emerged as a major legislation, Consequent to its implementation there has been a paradigm shift in the debt-recovery scenario in India. The present study is an event analysis of before and after of IBC 2016, and its impact on Indian banks stock prices. The research is based on if there is any change in stock prices of Indian banks due to the implementation of IBC 2016. The study is aimed at understanding the performance of banking stocks in the light of the introduction of the game changing regulation IBC in 2016. The study identified two groups of banking stocks, the public sector and the private sector during the study period.