Decade on, IBC still has miles to go despite stronger framework

A decade after the IBC transformed India's debt recovery framework, mounting delays and falling recoveries are testing the reform's effectiveness

On May 28, 2016, India gave presidential assent to the Insolvency and Bankruptcy Code (IBC), marking the birth of a unified bankr­uptcy framework aimed at tackling the country’s mounting bad-loan crisis and ending the era of limitless corporate-debt resolution. 

Barely a year later, on August 2, 2017, Hyderabad-based Synergies-Dooray Automotive bec­ame the first company to be resolved through the newly introduced law. The entire pr­ocess — from commencement to the National Company Law Tribunal’s (NCLT’s) approval of the resolution plan — took 191 days. 

Ten years later, the landmark reform that started with India’s “dirty dozen” — the 12 largest non-performing assets (NPAs) with outstanding claims of ₹3.45 trillion — has seen the closure of 7,102 cases. 

Of these, 1,419 were closed through resolution plans while the rest were settled, withdrawn, or reviewed. 

“Ten years ago, India’s debt-recovery system was fundamentally dysfunctional. Courts were clogged, processes dragged on for decades, and lenders had learned to expect very little. Borrowers gamed the system with impunity. Then came the IBC and for a while, it genuinely delivered,” said Vijay K Singh, senior partner, S&A Law Offices. 

However, the time taken since the first resolution in 2017 has inched up rapidly every year, reaching 744 days as of March 2026, against the mandated time limit of 330 days (earlier 270 days). 

Delays, which led to value erosion in assets and weaker market interest, have been one of the biggest and constant criticisms of the Code. Recoveries under resolution plans, measured either against admitted claims or liquidation value, have declined. 

“Realisation relative to liquidation value has reportedly fallen by about 30 per cent. Delays in concluding proceedings are thus imposing enormous economic costs,” said M S Sahoo, first head of the Insolvency and Bankruptcy Board of India (IBBI) and former distinguished professor at National Law University, Delhi. 

As a proportion of admitted claims, realisation under the IBC stood at 30.56 per cent as of March this year, as compared to 32.8 per cent last year. As a percentage of the liquidation value, those declined from 170 per cent as of March 2025 to 167 per cent as of March 2026, according to the IBBI data.

 

Strengthening NCLT benches 

The Ministry of Corporate Affairs has been pushing for more capacity at Benches of the National Company Law Tribunal (NCLT) to address delays. 

IBC experts say strengthening the adjudicating authority’s capacity is the most urgent reform needed. Against sanctioned posts of one president and 62 members, the “in position” strength of the NCLT as of February 14, 2026, was 53, according to a standing committee report. 

The NCLT, formed originally to deal only with matters connected with the Companies Act, has been handling the additional workload of the IBC without any increase in capacity. 

“We need an adequate number of members with sound capability, free from unnecessary judicial trappings, and committed to delivering outcomes within statutory timelines,” Sahoo said. 

That said, the IBC’s success is not just limited to the cases it has resolved but also to the large number of the ones settled even before formal admission. 

These pre-admission withdrawals collectively involved an aggregate amount of ₹14.61 trillion, spanning 32,179 companies.

The IBBI had earlier stated that “the credible threat of the Code that a Company may change hands has changed the behaviour of debtors”. 

According to the Reserve Bank of India’s (RBI’s) report “Trends and Progress on Banking in India 2024-25”, of the ₹1.04 trillion recovered by scheduled commercial banks through various mechanisms, nearly ₹54,528 crore came through the IBC route.

Since 2016, the Code has been amended seven times, one of which included inserting Section 29A to keep wilful defaulters out of the resolution process, the recognition of homebuyers as financial creditors, the introduction of pre-packaged insolvency mechanisms for micro, small and medium enterprises (MSMEs), and revisions to default thresholds. 

The latest round of amendments involved an overhaul of the system, bringing creditor-led insolvency resolution and enabling provisions for cross-border and group insolvency among a host of changes. 

IBC experts, however, stress that these are not the things holding back the outcomes of the law. 

Sahoo pointed out: Parliament and the judiciary have been more than generous in facilitating solutions, but excessive reliance on them to cure what are essentially failures in implementation may prove counterproductive. 

Sonam Chandwani, managing partner, KS Legal & Associates, said: “The focus must shift towards strengthening institutional capacity and improving execution efficiency.” 

 “Reducing litigation-driven delays, enhancing the quality and accountability of insolvency professionals, and ensuring timely implementation of approved resolution plans will be critical to the next phase of reform,” Chandwani added.

 

The way forward 

There are two areas which IBC practitioners feel need a closer look. First, the treatment of operational creditors, largely constituted by MSMEs, needs reconsideration. In 2024-25, for which the data is available, financial creditors realised 37 per cent of their claims while operational creditors realised 10 per cent. 

The second is the issue of operationalising individual insolvency, which would deal with partnerships and proprietorships, which make the backbone of entrepreneurship in India. 

The IBC provides for a fresh start process for individuals with very limited means, but it is yet to be implemented. 

                                   

                                   

Key amendments 

• 2016: IBC is introduced
• 2017: Section 29A inserted to keep wilful defaulters, related parties out of resolution process
• 2018: Granted home buyers status of financial creditors
• 2019: Timeline for completing CIRP extended to 330 days
• 2020: Suspended initiation of insolvency proceedings for pandemic-related defaults
• 2021: Brought pre-packaged insolvency framework for MSMEs
• 2026: Complete overhaul with creditor-initiated insolvency resolution, enabling provisions for cross-border,group insolvency, and mandatory admission for financial creditors’ insolvency applications, etc