The yeast, Cryptococcus sp. MTCC 5455 was grown on various agro-industrial residues for the production of lipase. A maximum lipase activity of 753 ± 19 U g dry substrate−1 (U gds−1) and a biomass of 103 ± 5 mg gds−1 was obtained at 25 °C and 120 h using cottonseed oil cake with 71% moisture content and 30% (v/w) inoculum. The recovery of the enzyme was increased by 14.1%, when the fermented substrate was extracted in 2 mM CaCl2.2H2O solution. The crude enzyme partially purified by (NH4)2SO4 precipitation showed a major 22 kDa protein on SDS-PAGE. The enzyme has good potential for hydrolysis of poly(butylene succinate) (PBS) and poly(butylene succinate-co-butylene adipate) (PBSA) and complete degradation of the polymeric films were observed at 72 h and 16 h respectively. The degradation was evaluated by Fourier transform infrared (FTIR) and 1H NMR spectroscopy. The complete hydrolysis of polymers by Cryptococcus sp. lipase makes the process ideal and also serves as a baseline for its exploitation in polymer degradation.