IBC helped banks recover Rs 4 lakh crore in 10 years: IBBI Chairman

India’s Insolvency and Bankruptcy Code completed ten years of operation this month, with the insolvency regulator reporting that the law has facilitated recoveries of over ₹4 lakh crore for creditors since its enactment in 2016, accounting for 95% of the fair value of assets processed through the system.

The Insolvency and Bankruptcy Board of India, in a statement marking the anniversary, said that as of March 2026, a total of 8,987 cases had been admitted under the Code, of which 7,102 had reached closure. Of these, 1,419 cases yielded formal resolution plans, while 3,003 ended in liquidation. The regulator said creditors recovered 167% of the liquidation value of assets through the resolution process, underlining the advantage of reviving companies as going concerns over selling them piecemeal.

IBBI Chairperson Ravi Mital said the Code had not merely reformed insolvency law but had produced an institutional transformation with far-reaching consequences for credit markets, corporate behaviour, and investor confidence.

Pre-admission settlements dominate

The regulator highlighted that the Code’s impact extended well beyond formal proceedings. More than 30,000 cases filed before the National Company Law Tribunal were withdrawn at the pre-admission stage, with the amounts involved estimated at nearly ₹14 lakh crore. These settlements, the IBBI said, reflected the deterrent effect of the law in compelling borrowers to resolve stress before it escalated to formal insolvency.

The board said that without these pre-admission settlements, the banking sector’s gross non-performing asset ratio would have remained substantially above the 2.1% recorded as of September 2025. The ratio stood at 11.8% in 2017, a year after the Code was enacted.

Banks’ primary recovery tool

The Reserve Bank of India’s Report on Trends and Progress of Banking in India 2024–25 identified the Code as the most effective mechanism for recovery of stressed assets. Of the total ₹1.04 lakh crore recovered by scheduled commercial banks through all channels in the period, nearly ₹0.54 lakh crore — or 52.4% — came through the IBC process. The RBI report also noted that recovery rates under the Code improved to 36.6% in 2024–25 from 28.3% the previous year.

Average recovery rates have risen from 15–20% in the pre-IBC period to around 30% since the Code’s implementation, while resolution timelines have compressed from six to eight years to approximately two years.

Distressed companies revived

Of the 7,102 closed cases, approximately 58% resulted in successful rescue rather than liquidation. The IBBI noted that around 42% of companies that found resolution plan buyers had previously been with the Board for Industrial and Financial Reconstruction or were effectively defunct at the time of admission.

A study by IIM Ahmedabad published in 2025, covering resolved firms in the five years following resolution, found average sales increased by 89%, capital expenditure rose by 106%, and asset turnover improved by 131%. The aggregate market capitalisation of resolved listed entities rose from approximately ₹2.8 lakh crore to around ₹9 lakh crore over the same period.

Borrower behaviour shifts

An IIM Bangalore study on the Code’s behavioural impact found that the proportion of loan accounts transitioning from overdue to normal status increased steadily between 2018 and 2024. The average number of days an account remained overdue fell from 248–344 days to 30–87 days over the period.

S&P Global Ratings upgraded India’s insolvency framework from ‘Group C’ to ‘Group B’ during the decade, citing improvements in recovery efficiency and the resolution ecosystem.

The IBBI said the continued evolution of the insolvency system would remain critical to India’s goal of becoming a developed economy by 2047.

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