IBC at 10: A Decade of Transforming India’s Insolvency Framework

Context

The Insolvency and Bankruptcy Code (IBC), introduced in 2016, has completed ten years of implementation, emerging as a landmark reform that has strengthened India’s insolvency ecosystem, improved credit culture, and enhanced corporate accountability.

IBC at 10: A Decade of Transforming India’s Insolvency Framework

Understanding the Insolvency and Bankruptcy Code (IBC)

What is the IBC?

  • The Insolvency and Bankruptcy Code (IBC), 2016 is a comprehensive legal framework enacted to streamline insolvency and bankruptcy proceedings in India.
  • It replaced multiple fragmented and time-consuming laws with a unified mechanism for resolving financial distress.
  • The Code covers corporate entities, partnership firms, and individuals, providing a structured process for insolvency resolution and liquidation.
  • It emphasizes creditor rights, value maximization of assets, and timely resolution of stressed assets.

Core Pillars of the IBC

Single-Code Approach

  • Consolidates various insolvency-related laws into one integrated legislative framework.
  • Ensures greater clarity, consistency, and efficiency in insolvency proceedings.

Time-Bound Resolution Process

  • Prescribes statutory timelines for completing the Corporate Insolvency Resolution Process (CIRP).
  • Aims to prevent erosion of asset value due to prolonged litigation and delays.

Creditor-Centric Framework

  • Transfers control of a defaulting company from promoters to the Committee of Creditors (CoC).
  • Empowers financial creditors to decide the future course of the distressed entity.

Specialized Adjudication System

  • Corporate insolvency cases are adjudicated by the National Company Law Tribunal (NCLT).
  • Insolvency matters related to individuals and partnership firms are handled by the Debt Recovery Tribunal (DRT).

Robust Institutional Architecture

  • Overseen by the Insolvency and Bankruptcy Board of India (IBBI).
  • Supported by Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs), and Information Utilities (IUs).

Transparent Liquidation Waterfall

  • Establishes a clear hierarchy for distributing proceeds from liquidation.
  • Gives priority to insolvency resolution costs, workmen’s dues, and secured creditors before shareholders.

Major Accomplishments of the IBC in Ten Years

Unlocking Stressed Capital

  • The Code has facilitated the recovery of substantial funds locked in distressed assets.
  • Example: By March 2026, resolution plans approved in 1,419 cases resulted in recoveries exceeding ₹4 lakh crore, equivalent to about 95% of fair value and 167% of liquidation value.

Reduction in Banking Sector NPAs

  • Improved recovery mechanisms have contributed significantly to strengthening bank balance sheets.
  • Example: Gross Non-Performing Assets (GNPA) of the banking sector declined from nearly 11.8% in 2017 to about 2.1% in September 2025.

Encouraging Early Debt Settlement

  • The possibility of losing management control acts as a strong deterrent against prolonged defaults.
  • Example: More than 30,000 cases were settled before admission into formal insolvency proceedings, involving claims worth approximately ₹14 lakh crore.

Revival of Distressed Enterprises

  • Many companies have witnessed operational recovery and renewed growth after successful resolution.
  • Example: Resolved firms recorded an 89% increase in sales and a 131% improvement in asset turnover, while the market capitalization of listed resolved companies rose from ₹2.8 lakh crore to ₹9 lakh crore.

Improvement in Credit Discipline

  • Borrowers have become more cautious regarding debt obligations due to stricter enforcement mechanisms.
  • The Code has strengthened confidence among lenders and investors.

Challenges in the IBC Framework

Persistent Delays in Resolution

  • Heavy caseloads and vacancies in tribunals continue to affect the speed of proceedings.
  • Example: Average resolution timelines remain around two years despite statutory deadlines.

High Incidence of Liquidation

  • A significant number of cases still end in liquidation rather than successful resolution.
  • Example: Out of 7,102 closed cases by March 2026, around 3,003 resulted in liquidation.

Value Erosion of Assets

  • Delayed proceedings can reduce the value of assets and lower recovery rates for creditors.
  • Businesses often lose operational viability during extended legal processes.

Inconsistent Recovery Rates

  • Recovery performance varies across sectors and institutions.
  • Example: Recovery rates for scheduled commercial banks stood at around 36.6% during 2024–25.

Burden of Legacy and Defunct Cases

  • Many insolvency applications involve non-operational or long-defunct companies.
  • Example: Around 42% of cases reaching resolution plans were either legacy BIFR matters or already inactive entities.

Capacity Constraints

  • Shortage of judicial members, technical experts, and insolvency professionals affects efficiency.
  • Growing case volumes place additional pressure on the institutional framework.

Way Forward

Expand NCLT Infrastructure

  • Establish additional benches and fill existing vacancies to reduce pendency.
  • Strengthen technological and administrative support systems.

Promote Pre-Packaged Insolvency

  • Extend pre-pack insolvency mechanisms to a wider range of corporate entities.
  • Encourage faster and more cost-effective restructuring outside traditional litigation.

Strengthen Information Utilities

  • Improve digital integration and data-sharing among creditors and regulatory institutions.
  • Enable quicker verification of claims and defaults.

Enhance Inter-Regulatory Coordination

  • Foster better cooperation among the IBBI, RBI, SEBI, NCLT, and enforcement agencies.
  • Minimize jurisdictional conflicts and procedural delays.

Build Specialized Expertise

  • Provide advanced sector-specific training for Insolvency Professionals.
  • Improve enterprise management and value preservation during resolution.

Focus on Resolution over Liquidation

  • Encourage rescue and restructuring of viable firms before liquidation becomes necessary.
  • Develop sector-specific resolution frameworks for complex industries.

Conclusion

Over the last decade, the Insolvency and Bankruptcy Code has fundamentally reshaped India’s credit and insolvency landscape. By replacing fragmented laws with a modern, creditor-driven framework, it has improved recovery rates, reduced bad loans, enhanced corporate accountability, and revived numerous distressed businesses. As India moves toward becoming a major global economy, strengthening institutional capacity, reducing delays, and promoting faster resolutions will be critical to ensuring that the IBC continues to serve as a cornerstone of financial stability and sustainable economic growth.

Source: PIB

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