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In the context of IBC, insolvency refers to a situation where:

medium Q4 of 15
Banking Awareness - Banking Acts, Reforms & Risk Management
In the context of IBC, insolvency refers to a situation where:
AA borrower is unable to repay debts when due
BA bank faces liquidity shortage
CInterest rates rise sharply
DDeposits exceed loans
Step-by-Step Solution

  1. Step 1: Understand the term insolvency

    Insolvency means inability to meet debt obligations.

  2. Step 2: Apply it to IBC context

    IBC triggers when borrowers cannot repay dues on time.

  3. Final Answer:

    A borrower is unable to repay debts when due → Option A

  4. Quick Check:

    Unable to pay debts = insolvency ✅
Quick Trick: Insolvency = inability to pay.
Common Mistakes:
MISTAKES
  • Confusing borrower insolvency with bank liquidity issues.
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