In New Delhi, on April 1, the Parliament passed amendments to the insolvency law to expedite the resolution of struggling companies and reduce the backlog of cases. Finance Minister Nirmala Sitharaman emphasized that the goal is not to liquidate companies, but to help them operate with safeguards in place.
The Rajya Sabha passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2026, through a voice vote. This followed the Lok Sabha's approval on March 30.
As of December 2025, the IBC has facilitated the resolution of 1,376 companies, enabling creditors to recover approximately ₹4.11 lakh crore. Financial creditors have seen recoveries exceeding 34% of their claims.
IBC provides a framework for rescuing viable businesses and resolving financial distress while preserving enterprise value, Sitharaman stated during a discussion in the Rajya Sabha.
"IBC was never intended to be a debt recovery tool. The recovery values are incidentally a byproduct. The IBC process is market-driven," she explained.
"Recoveries reflect the underlying asset quality and the commercial viability of the distressed enterprise," Sitharaman added, responding to concerns raised by some members of the Rajya Sabha regarding large haircuts and low recovery rates in the insolvency process.
She also noted that recoveries depend on the nature of the company, its sector, and broader economic considerations, and that IBC realizes 94.95% of the fair value at the time of admission.
Recoveries exceeding 171.54% of the liquidation value indicate recovery levels and reflect the enterprise's distressed state upon entry, not a failure of the resolution framework, the minister stated.
Sitharaman further stated that IBC has contributed to improving the health of the Indian banking sector.
"One concrete thing I can say about India is that the Code has actually contributed to improving the health of our banking sector. One of the reasons why India's banking sector has actually gotten better is because of the way in which IBC has recovered assets and gone through the process, giving back money to the banks," she said.
Banks have recovered a total of ₹1,04,099 crore through various channels, and a significant portion, ₹54,528 crore (52.3%), comes from the IBC channel alone, she added.
She also mentioned that the World Bank, in its 2019 report, observed that reforms to India's insolvency regime increased creditor recovery rates from 26.5% to 71.6% per US dollar.
"Even just after a few years of its introduction, it has been recognized worldwide," Sitharaman stated.
The Act was enacted in 2016, and since then, it has undergone seven amendments.
Regarding the reasons for the new amendments, Sitharaman said that IBC is a law related to economic activity, and the legislation must respond to the growing needs of the economy. The government has been making periodic amendments required by industry and stakeholders.
Sitharaman emphasized that the intent of IBC is not to liquidate companies but to provide a resolution that will keep them operating.
"IBC was not brought with the intention of liquidating companies. It was brought in to address the stress that companies are facing and to provide a resolution that will allow them to return to some form and then regain their previous status with appropriate safeguards," she said.
The minister pointed out that there are some companies where no resolution is possible despite repeated attempts, so they ultimately go for liquidation.
In the current set of amendments, the government aims to facilitate the expeditious admission of insolvency applications by limiting adjudication to the existence of default and relying more on information utilities, along with setting statutory timelines for adjudicatory authorities to reduce delays.
Another important aspect is to strengthen the liquidation process through enhanced creditor oversight, ensuring the independence of the liquidator and removing procedural overlaps.
It also introduces an enabling framework for group insolvency and cross-border insolvency, aimed at improving investor confidence and aligning domestic processes with international best practices.
The minister also informed the upper house that micro, small, and medium enterprises (MSMEs) are exempted from disqualification under Sections 29A, 29AC, and 29AH of the IBC.
This provision enables existing promoters to participate in the resolution process and facilitates the rescue of businesses, ensuring that small players do not lose their enterprises when they enter insolvency, she said.
The bill replaces the underutilized fast-track process with a new creditor-initiated insolvency framework, featuring out-of-court initiation, debtor-in-possession, and creditor-in-control models, where management continues to vest in the existing Board of Directors or partners with safeguards, and defined timelines.
Furthermore, it introduces an enabling framework for group insolvency and cross-border insolvency to promote investor confidence and align domestic practices with best international practices.
Stricter timelines will be put in place to ensure the timely resolution of stressed companies, and there will be penalties to deter vexatious and frivolous complaints that delay the process.
Among other changes, an application for initiating the insolvency resolution process has to be admitted within 14 days if the default by a company has been established, and appeals related to IBC before the National Company Law Appellate Tribunal (NCLAT) have to be decided upon within three months.