Nine years of IBC: Transforming India’s insolvency landscape

Since its enactment in 2016, the Insolvency & Bankruptcy Code (IBC) has fundamentally reshaped India’s insolvency landscape and its approach to credit discipline, business revival and insolvency value realization. As we mark nine years of IBC, the data and corporate insolvency trends reveal a story of progress, resilience and ongoing challenges, offering valuable lessons for policymakers, creditors, and businesses alike. 

IBC’s impact on Indian economy: Key numbers at a glance

• 30,000+ cases resolved before admission under IBC, covering underlying defaults of INR13.78 lakh crore
• 6,761 entities achieved closure, of 8,654 entities admitted for Corporate Insolvency Resolution Process (CIRP), with ~1,300 resolution plans for admitted entities
• INR12 lakh crore aggregate debt resolution via resolution plans
• 2.58% gross NPA of scheduled commercial banks as of March 2025, a multi-decadal low
• 63 sanctioned National Company Law Tribunal (NCLT) judges across 16 benches in India
• 4,576 registered insolvency professionals acting as resolution professionals 

Strengthening credit discipline and business revival

The IBC framework has materially contributed to creditor recovery improvement, delivering 171% of liquidation value and enabling INR4 lakh crore in realizations through resolution plans over the past nine years as per Insolvency and Bankruptcy Board of India (IBBI). Recoveries under the Code have consistently outperformed earlier mechanisms such as Debt Recovery Tribunals (DRTs), Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESI Act) and Lok Adalat, owing to improved credit discipline and greater alignment between lenders and borrowers. This has encouraged cooperative settlements before admission, reduced the burden of non-performing assets (NPAs), and allowed banks to redeploy capital into productive sectors of the economy.

A more structured and predictable insolvency resolution framework has also bolstered investor confidence. Evidence from an IIM Ahmedabad study shows that resolved companies exhibit strong post-CIRP turnaround: revenues rising by 76%, liquidity improving by 80%, workforce nearly doubling, and capex infusion increasing by 130% within 2–3 years of resolution. These gains highlight the broader economic value of timely resolution and business revival.

The Code continues to evolve with a consistent uptrend in yearly resolutions, improved insolvency value realization and timelines post Covid-19. However, despite clear progress, delays and operational bottlenecks remain a critical challenge. Resolution approvals currently take ~597 days on average, well beyond the 330-day statutory limit, diluting value maximization and slowing capital recycling, as per IBBI. Data indicates a clear negative correlation between resolution timelines and creditor realizations, with creditor realizations dropping ~15% beyond 330 days and a further ~5% decline past 600 days. Strengthening institutional capacity, streamlining processes, and driving innovation in insolvency practices will be essential to unlock the next phase of effectiveness under the Code. 

An assessment of CIRP admissions across different entity categories indicates notable variations in resolution pathways and outcomes. Cases initiated by financial creditors demonstrate stronger performance, with higher resolution rates, average claim sizes around INR1,134 crore, and value realization level at ~188% of liquidation value, according to IBBI data and EY analysis. Conversely, operational creditor-initiated cases have lower resolution rates, debt size and recovery rates, as these are predominantly concluded before CIRP conclusions, with ~52% resulting in settlements or withdrawals under Section 12A of IBC. Further, since FY22, financial creditor-initiated CIRPs account for around 55% of total admissions, underscoring the increasing utilisation of the Code by financial creditors as a formal restructuring avenue, and therefore a separate lens may be attached to the financial and operational creditor initiated CIRPs.

Additionally, it is observed that larger cases (INR5,000 crore-plus claim size) take ~200 days longer than the average time period to achieve CIRP closure, despite contributing more than 70% of overall creditor realizations and therefore there may be merit in further evaluating a separate fast track mechanism for some of the larger and complex cases, with pre-defined thresholds and criteria, considering enhanced macro-economic benefits that may arise from such resolutions.

Sources: IBBI quarterly newsletters, annual reports and resolution updates till March 2025, IIM-Ahmedabad study, EY insights and public information.