Insolvency and Bankruptcy Code (IBC) completes 10 years

 India's Insolvency and Bankruptcy Code (IBC) completes 10 years today. A decade ago, recovering money from a distressed borrower in India meant navigating a maze of fragmented laws — SICA, SARFAESI, DRT, winding-up petitions — often taking 6 to 8 years, with creditors recovering as little as 15–20 paise on the rupee.

The IBC was enacted in 2016 to fix exactly that. It promised a creditor-driven, time-bound, transparent mechanism for resolving financial distress. Ten years in, the results are significant — though the journey has been as much about culture change as it has been about law.

📊 THE NUMBERS AT A GLANCE (as of March 2026)

✦ 8,987 cases admitted to the NCLT process

✦ 7,102 cases reached closure

✦ 1,419 resolution plans successfully approved

✦ ₹4 lakh crore+ realised for creditors

✦ Recovery at 95% of fair value and 167% of liquidation value

✦ 52.4% of all bank recoveries now flow through IBC (₹0.54L Cr of ₹1.04L Cr total)

✦ Recovery rate improved from 28.3% (FY24) to 36.6% (FY25)

✦ Resolution timelines cut from 6–8 years → ~2 years

🏦 IMPACT ON THE BANKING SYSTEM

Perhaps the most visible impact of IBC has been on the health of India's banking sector.

Gross NPAs in the banking system stood at a staggering 11.8% in 2017. As of September 2025, that number has fallen to 2.1% — a transformation that few would have predicted a decade ago.

Critically, the RBI's own Report on Trend and Progress of Banking 2024–25 identifies IBC as the most effective credit recovery mechanism available to scheduled commercial banks — ahead of SARFAESI, DRTs, and Lok Adalats.

Without the deterrent effect of IBC — which led to over 30,000 cases being settled at the pre-admission stage involving nearly ₹14 lakh crore — the NPA ratio would have been significantly worse.

That pre-admission settlement figure is the one that often gets overlooked. It tells us that IBC is reshaping debtor behaviour long before a company formally enters insolvency proceedings.

🔄 BEYOND RECOVERY: WHAT HAPPENED TO RESOLVED COMPANIES?

Recovery numbers matter. But what happened to the businesses after resolution?

An IIM Ahmedabad study (2025) tracked resolved firms over five years post-resolution and found:

→ Average sales grew by ~89%

→ Asset turnover ratios improved by ~131%

→ Capital expenditure rose by ~106%

→ Aggregate market cap of resolved listed entities jumped from ₹2.8 lakh crore to ₹9 lakh crore

These are not zombie companies limping along — many are genuinely revived enterprises contributing to the broader economy.

Notably, ~42% of companies that went through IBC resolution were either defunct or had previously failed under BIFR. The Code gave these entities — and their workforces — a second chance.

🧠 THE BEHAVIOURAL SHIFT — THE REAL REVOLUTION.

Laws are only as powerful as the behaviour they change.

An IIM Bangalore study found measurable improvement in credit discipline post-IBC. The proportion of loan accounts moving from "Overdue" to "Normal" has been steadily increasing since 2018. More strikingly, the average number of days an account remained overdue fell from 248–344 days to just 30–87 days.

This is the intangible dividend of IBC — borrowers who once delayed repayments strategically are now settling dues earlier, because the cost of default has become real and predictable.

S&P Global Ratings upgraded India's insolvency framework from Group C to Group B — a recognition that the ecosystem around resolution has matured considerably.

⚖️ WHAT STILL NEEDS WORK

Honest assessment demands acknowledging the gaps:

→ Timelines remain a challenge — average resolution still exceeds the 270-day statutory limit in complex cases

→ The haircut problem — financial creditors absorbing large haircuts raises questions about pricing of credit risk

→ Liquidation outcomes are often poor — 3,003 cases ended in liquidation, with asset realisation well below book value

→ Capacity constraints at NCLT — infrastructure and bench strength continue to bottleneck the process

→ Cross-border insolvency framework is still evolving — critical for multinational groups

The IBC jurisprudence has matured significantly, but the operational infrastructure needs to keep pace.

🔭 LOOKING AHEAD

India's aspiration of Viksit Bharat 2047 rests significantly on the quality of its financial architecture. An efficient insolvency system is not just a legal reform — it is infrastructure for entrepreneurship.

When entrepreneurs know that failure is survivable, they take better risks. When lenders know recovery is possible, they price credit more accurately. When investors see accountability enforced, confidence deepens.

The IBC's first decade was about establishing the framework. The next decade needs to be about deepening it — faster resolution, better liquidation outcomes, stronger cross-border mechanisms, and a more capacitated adjudicatory system.

For those of us in law, finance, restructuring, and policy — this is an exciting space to be working in.