New Delhi: When Parliament took up a new bankruptcy code for passage in May 2016, the minister who replied to the debate in Lok Sabha, Jayant Sinha, mentioned its critical place in the overall economic agenda of the government—a friction-free exit for the corporate sector, complementing the policy support given to startups and entrepreneurship.
Under the Insolvency and Bankruptcy Code (IBC), large distressed companies like , India, Monnet Ispat & Energy Ltd and Electrosteel Steels Ltd—which were among the Reserve Bank of India (RBI’s) ‘dirty dozen’ found new owners, leading to a reduction of toxic assets in the banking sector and revival of these businesses.
Financial service providers Dewan Housing Finance Corp. Ltd and Srei Equipment Finance Ltd are also among the entities that have resolved debt under IBC.
RBI data shows that the extent of bad loans has decreased over the last decade. The share of gross non-performing assets in gross advances of scheduled commercial banks fell from 11.8% in 2018 to 2.22% in 2025.
Under the Code, once a payment default is established, promoters not only lose management control of the company but also face investigations into dubious pre-bankruptcy transactions and fund diversions, thereby shifting the power equations between shareholders and lenders.
Besides, the inclusion of personal guarantors in the IBC framework from 2019 ensures that promoters cannot keep certain assets out of the bankruptcy estate of their defaulting companies.
The Code has also led to a shift in the balance of power between material and service suppliers and their larger clients, who could be taken to bankruptcy tribunals for payment defaults. This has given micro, small and medium enterprises a leg up.
Cleaning up the banks
According to the Insolvency and Bankruptcy Board of India (IBBI), the rule-maker, over ₹4.3 trillion in dues is realizable by creditors from the 1,419 cases resolved under the Code, which accounts for 31% of the ₹14 trillion in claims admitted under the process.
India ranked 52 in resolving insolvency, among 190 nations, in World Bank’s ease of doing business ranking benchmarked to 2019. This was a place below China in the ranking. Finland, US, Japan, and Germany were the top countries in resolving insolvency as per the UN ranking.
The number of companies rescued goes up to 4,099, up to the end of March, if one includes cases where bankruptcy petitions were withdrawn, settled on payment, or decided on appeal. Till March 2026, 1,692 companies have been completely liquidated. These enabled creditors to realize ₹21,000 crore, or over 86% of their liquidation value.
When IBC started admitting the top 12 companies first in 2017, no one had thought it would be this effective in addressing the all-time high stress in Indian banking at the time, said Surendra Raj Gang, partner, Deals—Debt and Special Situations at Grant Thornton Bharat.
Insolvency regimes in other countries started with smaller companies before scaling up to cover large entities, he said. “But, India’s needs were different, stress was very high, and we were actually late in introducing the insolvency regime, and hence we started with large companies first, called the ‘dirty dozen’.”
Policy makers, tribunals, the regulator, and insolvency professionals played their part in the transformation, Gang explained.
“IBC not only helped in resolving the stress in the Indian banking sector, but it has also helped in a big mindset shift in forcing promoters to be more disciplined in their credit behaviour,” he said.
IBC faced its biggest criticism when the Supreme Court, in April, asked the National Company Law Tribunal (NCLT) Principal Bench, New Delhi, to provide information at the earliest on pending resolution applications, Mint .
The apex court, on the same day, noted that the picture presented to it was “extremely grim and dismal.” and added that the issue needs to be addressed on a war footing.
Speed of rescue
However, the creative destruction of businesses in distress and the revival of viable ones—the friction-free market performance that Jayant Sinha told parliamentarians a decade ago—was not easy. Many cases witnessed intense litigation before and after the resolution plan was accepted by tribunals, going all the way up to the Supreme Court.
Before IBC, liquidation of a company took between 3 and 10 years, and resolution took an average of about four years, under the previous regime of the Sick Industrial Companies Act.
Data from IBBI showed that under IBC, the 1,419 cases that yielded resolution plans by the end of March took, on average, 621 days, excluding certain periods as decided by the tribunals. The 3,003 cases that ended in liquidation took, on average, 531 days to conclude. That is obviously an improvement over the previous regime, although it breached the maximum 330 days envisaged in the Code for debt resolution.
The 2026 amendments
The Code will enter a new phase under the amendments enacted in April.
Previous amendments were meant to increase accountability among owners of defaulting companies by disallowing them from bidding for assets, empowering home buyers as financial creditors, and curbing the abuse of IBC by vendors and material suppliers to arm-twist their clients.
The Code, amended in April, will now attempt a new experiment: for a select class of companies and creditors, debt resolution could happen without displacing the existing management, marking a new era in India’s bankruptcy law. Along with this, schemes for cross-border insolvency and group insolvency will be implemented.
IBBI chairperson Ravi Mital said in the regulator’s latest quarterly update that the amendments will make the Code future-ready and more resilient, emphasizing the need for timely decisions and fairness to all parties.
“With many changes to be effective this year, we are definitely moving to IBC 2.0, which is expected to be more efficient and effective,” said Gang of Grant Thornton Bharat.