Nine years after the Insolvency and Bankruptcy Code was launched with the promise of faster resolutions and better recoveries, India’s insolvency system is once again up for a reset. Rating agency ICRA believes the proposed amendments to the IBC are encouraging, especially at a time when recovery rates remain low and resolution timelines continue to stretch far beyond what the law originally envisioned.
According to ICRA, recovery timelines under the IBC have lengthened further in the first half of FY2026, while recovery rates have slipped. This reversal comes after some improvement until Q4 FY2025, raising concerns among lenders who are already grappling with steep haircuts.
The proposed amendments, introduced through the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, aim to tackle some of these long-standing issues. Key proposals include the introduction of group insolvency, cross-border insolvency, and creditor-initiated insolvency. These measures, ICRA says, could help improve recovery rates and reduce delays, though largely for non-real estate cases.
The real estate sector remains a sore point. Despite accounting for the second-highest share of ongoing corporate insolvency resolution process (CIRP) cases as of September 30, 2025, sector-specific reforms for real estate have not been addressed in the current proposals. ICRA notes that resolving stuck housing projects while protecting homebuyers requires structural reforms tailored specifically to the sector, something the latest amendments stop short of delivering.
Since its inception, the IBC has still fared better than earlier recovery mechanisms. The total recovery under the code stands at around Rs. 4 lakh crore. Till September 2025, about 8,658 corporate debtors had been admitted under the IBC, with nearly 63 percent of cases resolved through resolution plans, withdrawals, or liquidation. However, the quality of recoveries remains a concern. Successful resolution plans have yielded recoveries of just about 32 percent, forcing lenders to accept deep haircuts.
These challenges have prompted a broader rethink of the framework. The seventh amendment to the IBC was introduced in the Lok Sabha in August 2025 and examined by a Select Committee. Recommendations from both the Ministry of Corporate Affairs and the Select Committee were tabled in Parliament during the winter session. While the bill was earlier expected to be passed in that session, it is now likely to be taken up during the upcoming Budget session.
Manushree Saggar, Senior Vice President and Group Head, Structured Finance Ratings at ICRA, points out that delays remain the biggest pain point. As of September 30, 2025, nearly three-fourths of ongoing CIRP cases had exceeded 270 days after admission by the National Company Law Tribunal. This is well above the mandated timeline and reflects systemic bottlenecks rather than case-specific delays.
One of the major recommendations of the Select Committee is allowing more than one resolution plan and permitting asset-wise or business vertical-wise resolution. For companies operating across multiple segments, this could attract a wider pool of bidders and improve overall outcomes. The endorsement of the “clean slate” principle is also significant, as it ensures that settled judicial pronouncements are not reopened and separates the legal liability of the corporate debtor from that of erstwhile promoters and senior management.
Another key proposal is prescribing a statutory three-month timeline for the National Company Law Appellate Tribunal. While this is a step in the right direction, ICRA flags that delays at the NCLT level have not been directly addressed. As of March 2025, more than 30,000 IBC cases were pending before the NCLT. At the current pace and capacity, it could take over a decade to clear the backlog.
Even though fresh admissions to the NCLT have slowed, approvals of resolution plans have not picked up meaningfully. Only 105 resolution plans were approved in the first half of FY2026, compared to 124 in the same period last year. ICRA notes that increasing the number of NCLT and NCLAT benches will be crucial to bring down average resolution timelines, which currently exceed 700 days, more than twice the prescribed 330 days.
The proposed introduction of a creditor-initiated insolvency process with an out-of-court initiation mechanism could also ease pressure on the judicial system. Such a process is expected to be faster, less disruptive to businesses, and more cost-effective. Provisions for group insolvency and cross-border insolvency are seen as long-overdue reforms, especially in an economy where corporate structures are increasingly complex and global.
In a related move, the Insolvency and Bankruptcy Board of India has made disclosure of ultimate beneficial ownership mandatory in resolution plans. ICRA believes this will help close loopholes that allowed promoters to hide ownership through layered structures.
The proposed amendments signal intent. Whether they translate into faster resolutions and better recoveries will depend on execution, capacity building at tribunals, and whether future reforms finally address the unique challenges of the real estate sector.
