IBC Delivers 52% of Total Bank Bad-Loan Recoveries, Lok Sabha Passes Amendment Bill
Finance Minister Nirmala Sitharaman told Lok Sabha that the Insolvency and Bankruptcy Code (IBC) contributed ₹54,528 crore out of total bank bad-loan recoveries of ₹1,04,099 crore — a share of 52.3%.
The Lok Sabha passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 on March 30, 2026, incorporating 12 amendments to strengthen the insolvency resolution ecosystem.
The bill introduces a Creditor-Initiated Insolvency Resolution Process (CIIRP) as an alternative to the existing Corporate Insolvency Resolution Process (CIRP), allowing financial creditors holding at least 51% of the debt to initiate proceedings.
A mandatory 14-day timeline is introduced for admitting insolvency applications once a company's default is established — intended to cut pre-admission delays.
The amendment retains and refines the Pre-Packaged Insolvency Resolution Process (PPIRP) for MSMEs and introduces frameworks for group insolvency and cross-border insolvency proceedings.
The Committee of Creditors (CoC) is now required to log reasons for approving or rejecting a resolution plan, improving accountability and transparency.
Insolvency and Bankruptcy Code, 2016: Architecture and Process
The IBC was enacted in 2016 to consolidate and amend laws relating to reorganisation and insolvency of corporate persons, partnership firms, and individuals. Before IBC, debt recovery was fragmented across SICA, SARFAESI, DRT, and Companies Act proceedings, leading to an average recovery of less than 26 cents on the dollar. The Code created a single unified framework with a creditor-in-control model, replacing promoter-in-possession.
The 52.3% recovery share demonstrates IBC's growing dominance among recovery channels; the CIIRP and 14-day admission timeline amendments are directly aimed at addressing delays that reduce ultimate recoveries.
Pre-Packaged Insolvency Resolution Process (PPIRP) for MSMEs
The PPIRP was introduced by the IBC Amendment in 2021 (effective April 2021) exclusively for MSMEs with defaults up to ₹1 crore. It is a hybrid model: unlike CIRP where management cedes control on Day 1, under PPIRP the existing management continues to run the business while simultaneously negotiating a resolution plan with creditors (a "debtor-in-possession" approach). This reduces reputational damage and operational disruption for smaller firms.
Key Details
- Applicable only to corporate debtors classified as MSMEs under the MSMED Act, 2006.
- The base resolution plan must be submitted by the management before filing — unlike CIRP where the plan comes later from external resolution applicants.
- A Swiss challenge mechanism allows any resolution applicant to better the base plan before the CoC.
- The entire process must be completed within 120 days (not 330 days as in CIRP).
- If the base plan is rejected, the matter transitions to CIRP automatically.
The 2026 amendment refines PPIRP to make it more accessible and effective for MSMEs, which form the backbone of India's industrial ecosystem and have historically struggled with full CIRP proceedings.
Committee of Creditors (CoC): Role and Accountability
The Committee of Creditors is the central decision-making body in any IBC resolution. It consists of all financial creditors of the corporate debtor, with voting rights proportional to the value of their admitted financial debt. The CoC's most critical power is approving a resolution plan — the approved plan is binding on the corporate debtor, all creditors, guarantors, and third parties. The CoC can also decide to liquidate the corporate debtor if no feasible resolution plan is found.
The mandatory logging of CoC reasons is a governance reform that improves transparency and reduces frivolous judicial challenges, which have been a major cause of resolution delays.
Group Insolvency and Cross-Border Insolvency
The existing IBC framework handles each company as a standalone entity, creating coordination failures when an entire corporate group fails simultaneously — creditors of subsidiaries may be disadvantaged by actions affecting the parent. Group insolvency provisions, announced but deferred for years, allow coordinated resolution across interconnected entities within a single proceeding. Cross-border insolvency provisions adopt the UNCITRAL Model Law framework, enabling Indian courts to cooperate with foreign courts when a company has assets or creditors in multiple jurisdictions.
Key Details
- India has not yet formally adopted the UNCITRAL Model Law on Cross-Border Insolvency, though it has been under discussion since 2018.
- Group insolvency was recommended by the Insolvency Law Committee (ILC) in its 2019 report.
- The 2026 amendment creates enabling frameworks — detailed rules are expected to follow via IBBI regulations.
- Cross-border provisions would apply when a foreign company has assets or creditors in India, or an Indian company has assets abroad.
These new frameworks signal India's intent to align its insolvency regime with global best practices, making it more attractive for international investors and lenders.
- IBC recovery share: ₹54,528 crore out of ₹1,04,099 crore total bank recoveries = 52.3%
- New admission timeline: 14 days from default establishment (mandatory)
- CIIRP trigger threshold: Financial creditors holding at least 51% of total financial debt
- PPIRP timeline: 120 days (vs. 330 days for CIRP)
- CoC approval threshold for resolution plan: 66% of voting shares
- CIRP base timeline: 180 days, extendable by 90 days, hard outer limit 330 days
- Section 7 (IBC): Financial creditor-initiated CIRP; Section 9: Operational creditor-initiated CIRP
- The IBC replaced SICA, SARFAESI recovery, DRT proceedings, and Companies Act winding-up as the primary restructuring route
- India's pre-IBC recovery rate: less than 26 cents on the dollar; IBC has significantly improved this
- Number of amendments introduced: 12, covering CIIRP, group insolvency, cross-border, CoC accountability, and PPIRP refinement