As the Insolvency and Bankruptcy Code (IBC), 2016 completes 10 years on May 28, both promise and frustration are in the air. On the one hand, recent amendments show a renewed policy thrust to strengthen the legislative and institutional framework for efficient resolution of financial distress. On the other, evidence mounts that creditors and investors are increasingly reluctant to opt for the cure it offers.
Even when a corporate debtor (CD) might still have surplus value as a “going concern” but struggles to manage its defaults autonomously, the IBC process no longer seems to be the most preferred option. Many firms would languish, silently witnessing an erosion of asset value and abject wasting of capital, yet they or their creditors would not seek IBC remedy. The long-drawn process for a CD to get admitted into the IBC process, finalise a resolution plan, and get it approved by the adjudicator clearly discourages stakeholders. In most cases, restitution becomes so protracted that the residual asset value is squandered in the process.
Timeline Crisis
These are the reasons why the number of IBC-anchored resolutions dropped to a 13-quarter low of just 36 in the March quarter (Q4FY26). Over 380 fully mature resolution plans are waiting to be implemented, merely because of an over-burdened National Company Law Tribunal (NCLT). The delays can even extend up to four years after the resolution professional submits a plan. The sheer inefficiency has recently invited stern remarks from the Supreme Court.
The number of resolution processes initiated under the Code fell to 665 in 2025-26, the lowest since 2022-23 (1,262). Worse, the share of resolutions sought by promoters is abysmally low (7% in 2025-26) and has only declined over time. As against a stipulated period of 330 days, the average time taken to close a case under the IBC framework since its inception has been more than 680 days, compared to the stipulated 330 days; this figure rose to 744 days in 2025-26.
The trend of progressive decline in the functioning of the IBC mechanism is indeed worrisome. It calls for resuscitation of the decade-long law and its supportive administrative and regulatory architecture with necessary modifications. The IBC and its counterparts in other countries are essential for the effective functioning of the market economy. It is particularly indispensable for India, a capital-scarce country. The IBC has its failings, but it still hasn’t been a failure, after all.
Value realisation by creditors under the IBC process until the end of 2025 was Rs 4.11 lakh crore, a creditable 31.6% of their admitted claims and 171.5% of the liquidation value of the firms concerned. An inexplicable administrative inefficiency is that the current NCLT strength is only 55 against 63 sanctioned posts while the required capacity is several times higher.
Capacity Bottlenecks
Besides, much deeper reforms are required to improve the efficacy of insolvency resolution. More effective pre-IBC mediation, some dilution of the primacy given to financial creditors in the distribution of proceeds, and a willingness to accept the inevitability of liquidation when resolution is impossible are called for. Banks in India must appreciate that a restructured firm would in most cases produce additional value over time, and stay invested to benefit from it, rather than exit quickly with haircuts. Operational creditors in India as vendors, raw material suppliers, and business partners play a vital role in the micro, small, and medium enterprise segment. They should get a say in the IBC’s decision-making and proceeds-sharing processes.