Why in the news
A decade on, the IBC is judged one of India’s most transformative economic reforms, though delays and liquidation-heavy outcomes persist.
Key facts
- Law: Insolvency and Bankruptcy Code, 2016; one time-bound, creditor-driven framework for companies, partnership firms and individuals.
- It replaced: older fragmented laws such as SICA, BIFR and Companies Act provisions.
- Results by March 2026: 1,419 cases ended in resolution plans; recovery above ₹4 lakh crore.
- Recovery equals 95% of fair value and 167% of liquidation value.
- Bank NPAs: gross NPAs fell from roughly 11.8% (2017) to 2.1% (September 2025).
Core features
| Feature | Detail |
|---|
| Time limit | CIRP to finish within 330 days including litigation |
| Control | On default, control passes from promoters to the Committee of Creditors (financial creditors), who approve or reject resolution plans |
| Professional | Licensed Insolvency Professional runs the firm, first as Interim Resolution Professional and then Resolution Professional |
| Corporate cases | NCLT, appeals to NCLAT |
| Individuals and partnerships | Debt Recovery Tribunal, appeals to DRAT |
| Regulator | Insolvency and Bankruptcy Board of India (IBBI) |
| Ecosystem | Insolvency Professional Agencies register IPs; Information Utilities hold verified default data, NeSL being the first |
| Outcomes | Resolution plan (rescue, often a new owner) or liquidation |
- Waterfall (Section 53): liquidation proceeds paid in fixed order: insolvency costs, next workmen with secured creditors, followed by employees with unsecured creditors, after that government dues and any remaining secured debt, then preference shareholders, and equity holders at the very end.
Concerns
| Issue | Data |
|---|
| Delays | Average resolution about two years against the 330-day goal |
| Liquidation | Of 7,102 closed cases, 3,003 went into liquidation |
| Bank recoveries | Scheduled commercial banks’ recovery rate fell to 36.6% in 2024-25 |
| Legacy load | 42% of resolved cases came from BIFR-era or defunct firms |
Way forward
- Add NCLT benches, fill judicial vacancies and dedicate capacity to IBC cases.
- Widen out-of-court pre-packs to all corporate categories.
- Upgrade Information Utilities with better data integration and quicker lender access.
- Standardise coordination among IBBI, RBI and enforcement agencies over competing asset claims.
- Give Insolvency Professionals sector-specific training to preserve enterprise value.
Background
- PPIRP: faster out-of-court route for MSMEs, brought by the IBC (Amendment) Act, 2021; existing promoters propose a plan to creditors before formal NCLT proceedings; resolution within about 120 days with lower cost and less disruption.
- Information Utilities: regulated entities that collect, verify and store borrower financial data; registered with IBBI under the 2017 IU Regulations; comparable in spirit to credit information companies; NeSL is government-promoted.
Exam angle
- CIRP limit: 330 days; regulator: IBBI; first IU: NeSL.
- Adjudicators: NCLT for corporates, DRT for individuals and partnerships.
- Waterfall provision: Section 53.