The Lok Sabha on Monday (30th March 2026) passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, as reported by the Select Committee. The proposed legislation introduces a series of reforms aimed at improving the efficiency and effectiveness of the insolvency resolution process.
The Bill seeks to amend the Insolvency and Bankruptcy Code, 2016, which has been a cornerstone of India's financial reforms since its implementation in 2016. With 12 key amendments, the latest changes aim to address procedural bottlenecks and enhance the overall resolution ecosystem.
India's insolvency framework continues to deliver strong results, with the Insolvency and Bankruptcy Code, 2016 (IBC) emerging as the most effective mechanism for recovering non-performing assets (NPAs) of banks.
Addressing the Lok Sabha, Finance Minister Nirmala Sitharaman highlighted that Scheduled Commercial Banks (SCBs) have recovered a total of Rs 1,04,099 crore, with the IBC alone contributing Rs 54,528 crore, over 52.3% of total recoveries.
IBC Driving Majority of Bank Recoveries
The data underscores the growing reliance on the IBC as a primary recovery channel. Compared to other mechanisms, the IBC has consistently delivered higher value realisation, reinforcing its role in strengthening India's banking system and resolving stressed assets efficiently.
Major Reform: New Creditor-Led Insolvency Framework
The government has proposed significant reforms to further enhance the IBC framework. The new Bill seeks to:
- Replace the underutilised fast-track Corporate Insolvency Resolution Process (CIRP)
- Introduce a creditor-initiated insolvency model with out-of-court initiation
- Implement a debtor-in-possession, creditor-in-control structure
- Allow management to remain with the existing Board or partners, with safeguards
- Ensure clearly defined timelines for faster resolution
These changes aim to make the insolvency process more flexible, efficient and business-friendly.
Push for Global Standards: Group & Cross-Border Insolvency
In a move to align with international best practices, the Bill also introduces:
- Group insolvency framework
- Cross-border insolvency provisions
These measures are expected to boost investor confidence and improve the ease of doing business in India.
Select Committee Recommendations Accepted
The Bill was reviewed by a Select Committee of the Lok Sabha, chaired by Baijayant Panda.
The Committee made 11 key recommendations, all of which have been accepted by the government. Additionally, a crucial transparency measure has been introduced:
- The Committee of Creditors (CoC) must now record reasons for selecting the successful resolution applicant
This step is expected to enhance accountability and trust in the resolution process.
Strong Recovery Metrics Under IBC
The Finance Minister emphasized that the IBC is designed to rescue viable businesses and preserve enterprise value , rather than merely liquidate assets.
Key performance highlights include:
- 1,376 companies resolved as of December 2025
- Rs 4.11 lakh crore recovered by creditors
- 94.95% realisation of fair value at the time of admission
- 171.54% recovery over liquidation value, indicating strong value preservation
- Over 34% recovery for financial creditors
These figures demonstrate that recoveries depend on the commercial viability of distressed assets rather than any shortcomings of the framework.
Market-Driven, Value-Focused Framework
The government reiterated that the IBC is a market-driven mechanism, where outcomes are determined by asset quality and investor interest. The higher recovery over liquidation value signals that the framework successfully maximizes value even in distressed situations.
Conclusion
With consistent recoveries, structural reforms, and alignment with global standards, the IBC is poised to remain a cornerstone of India's financial stability. The latest reforms are expected to further streamline insolvency resolution while strengthening creditor confidence and investor participation.
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