Economic Survey suggests that while the Insolvency and Bankruptcy Code (IBC) has delivered transformative gains over the past nine years, its progress is increasingly constrained by a binding institutional bottleneck.
The Code was designed to offer time‑bound resolution of corporate distress, yet the system now struggles under the weight of mounting pendency and capacity shortages that risk undermining its core promise.
The survey highlights that although IBC has strengthened credit discipline, reduced NPAs, and improved recovery rates, the timelines mandated under the law are routinely breached.
Severe Economic Erosion
Against the statutory limit of 330 days, the average duration of corporate insolvency resolution processes (CIRPs) has stretched to 713 days, rising further to 853 days for cases closed in FY25. Such delays are not merely procedural—they cause real economic damage.
As cases drag on, asset values erode, employees exit, customers shift to competitors, and supplier relationships weaken, reducing the likelihood of successful resolution.
The National Company Law Tribunal (NCLT), the fulcrum of the insolvency ecosystem, is at the centre of this strain. With only 30 benches handling matters under both the IBC and the Companies Act, pendency has surged to nearly 30,600 cases as of March 2025.
At current disposal rates, clearing this backlog could take close to a decade. The shortage of Resolution Professionals (RPs) compounds the problem: of 4,527 registered RPs, only 2,198 hold active Authorisation for Assignment, limiting the system’s ability to manage cases efficiently.
Stagnant MSME Framework
The Pre-Packaged Insolvency Resolution Process (PPIRP), introduced in 2021 to offer MSMEs a faster, less costly alternative, has seen only 14 admissions in four years. Procedural complexity, low awareness, trust deficits around debtor‑led processes, and the inability of small firms to fund the mechanism have all contributed to its limited uptake.
The Economic Survey suggest that these bottlenecks threaten to blunt the gains of a regime that has otherwise delivered measurable improvements in recoveries, governance, and credit behaviour.
The IBC Amendment Bill 2025 aims to address procedural delays and introduce a cross‑border insolvency framework, but the next phase of IBC should combine process reform with a rapid scaling of capacity.