Whalesbook
A Decade of Reform: Boosting Creditor Wins
India's Insolvency and Bankruptcy Code (IBC), introduced in 2016, has fundamentally changed how the country handles corporate distress. Before the IBC, creditors faced long waits and low returns in a disjointed legal system that often destroyed value. The IBC created a single, time-bound process focused on rescue, dramatically improving recovery rates.
Banks have seen recovery rates jump from just 13.2% in FY2018 to an estimated 30-36.6% in FY2025. S&P Global Ratings acknowledged this progress, upgrading India's insolvency regime to 'Group B' in December 2025. The agency noted improved recoveries and resolution times falling from years to about two years. As of late 2025, over 4,000 corporate debtors had been resolved, with creditors recovering more than 171% of what assets would fetch in liquidation. The market value of these resolved companies has also surged, more than tripling to INR 9 lakh crore in the five years after resolution.
Persistent Delays Plague the System
Despite these successes, the IBC faces major hurdles. The biggest issue remains the significant and persistent delays in resolving cases. The IBC sets a 330-day limit for resolution, but cases now average 713-853 days, more than double the allowed time.
This backlog means nearly 30,600 cases are pending at the National Company Law Tribunal (NCLT) benches, with current processing speeds suggesting it could take close to ten years to clear them all. Court rulings have also created uncertainty. For instance, the Vidarbha Industries judgment questioned if petition admission was always mandatory, and the Rainbow Papers case altered the order of payments in liquidation by treating government dues the same as secured debt. These issues threatened the predictability the IBC aimed to provide.
How India Compares Globally
Compared to other countries, India's insolvency framework is strong but still needs improvement. The U.S. and U.K., for example, report higher recovery rates around 81.8% and 85.3% respectively, compared to India's improved rates of 30-36.6%. While India's resolution timelines have drastically shortened from 6-8 years pre-IBC to about two years, they are still longer than Singapore's average of 0.8 years.
India lacks a legal tool called 'cross-class cram-down', found in the UK's Companies Act. This tool allows restructuring plans to be imposed on creditors who disagree, under specific rules. Its absence can make plan approval harder and lead to longer disputes.
The Core Problem: Execution vs. Intent
The IBC's main challenge is the gap between what the law intends and how it's actually put into practice. These extensive delays, caused by overloaded tribunals and lengthy court battles, aren't just operational problems; they directly threaten the entire framework's credibility. Each day of delay reduces asset values, lowers recovery potential, and discourages investors.
Although the IBC has shifted from favoring debtors to empowering creditors, justice is slow, hindering this creditor control. A Supreme Court ruling on February 18, 2026, reinforced an objective standard for admitting insolvency cases, restoring predictability after earlier confusing interpretations. However, limited tribunal capacity and the huge volume of pending cases remain significant weaknesses.
The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, passed in early 2026, aims to fix many issues by setting tighter deadlines, clarifying the priority of government dues, and setting rules for cross-border insolvency.
Next Steps: Improving Execution and Culture
The IBC's first decade shows the power of institutional reform. It has changed credit behavior, boosted recovery rates, and brought more discipline to the economy. However, the framework is still developing.
The crucial next step requires a cultural shift within the insolvency system, not just new laws. Increasing capacity, improving professional standards for insolvency practitioners, and speeding up court decisions are essential. The recent amendments are a positive step, but sustained focus on operational efficiency and a commitment to timely justice will determine if India's insolvency revolution can truly succeed.