The Insolvency and Bankruptcy Code, 2016 (IBC) has established itself as a consolidated framework for reorganisation, insolvency resolution, and liquidation of corporate persons, partnership firms, and individuals.
The primary objective of the code is to maximise the value of assets and it has significantly impacted the health of India's banking sector while redefining debtor-creditor relationships.
According to the Reserve Bank of India's Report on Trend and Progress of Banking in India released in December 2024, the IBC has emerged as the dominant recovery route for banks, accounting for 48 per cent of all recoveries.
Other recovery mechanisms include the SARFAESI Act at 32 per cent, Debt Recovery Tribunals at 17 per cent, and Lok Adalats at 3 per cent during the Financial Year 2023-24.
A study conducted by the Indian Institute of Management Ahmedabad in August 2023 analysed the financial performance of firms that underwent resolution under the IBC.
The findings revealed significant improvements in profitability, liquidity, and overall financial health of resolved firms in the post-resolution period, highlighting the positive impact of IBC on business continuity and value preservation.
As of December 31, 2024, a total of 8,175 Corporate Insolvency Resolution Processes have been initiated. Of these, 3,485 Corporate Debtors have been rescued, including 1,119 through resolution plans, 1,236 through appeal, review, or settlement, and 1,130 through withdrawal under section 12A.
Additionally, 2,707 Corporate Debtors have been referred for liquidation. The 1,119 cases that yielded resolution plans have realised a value of Rs 3.58 lakh crore for creditors, amounting to 162.79 per cent of liquidation value and 87.58 per cent of fair value.
To facilitate expeditious resolution processes and ensure proper implementation of the IBC, the Government has made six amendments to the code and 122 amendments to regulations since its inception.
Regular training and capacity-building programs for insolvency professionals, adjudicating authorities, and other stakeholders are conducted to improve the overall efficiency and effectiveness of the IBC ecosystem.
The government is also leveraging information technology through digital platforms to automate and streamline processes, making the system more efficient, accurate, and faster, ultimately leading to better outcomes for all stakeholders.