What is the purpose of bankruptcy and insolvency?

When a company is not able to make payments to its creditors or meet its financial obligations, the organisation will file for bankruptcy. In India, if a person files for bankruptcy, it will be difficult to get fresh loans. A troubled company may become insolvent when it is unable to repay its creditors money owed on time, often leading to a bankruptcy filing. You can read about Insolvency And Bankruptcy Code (IBC) – IBC Amendment Bill 2021 [UPSC Notes GS III] in the given link.

Further readings:

1. Non Performing Assets (NPA) – Facts for UPSC GS-III
2. Bad Banks – Idea Proposed by Indian Banking Association (IBA) Due to COVID-19