The government has presented its account of the Insolvency and Bankruptcy Code’s decade-long performance, but the same data that showcases its achievements also reveals significant volatility in the recovery rates.
“The resolution time and recovery data varies from case to case depending upon the quality of the insolvent asset,” said the Ministry of Corporate Affairs (MCA) in its statement.
The MCA has stated that 1,419 companies have been resolved under the corporate insolvency resolution process as of March 31, 2026.
The presented data highlights that creditors have realised INR 4.32 lakh crore through these resolutions, equivalent to 94.6 percent of fair value and 166.9 percent of liquidation value, indicating that resolution has consistently yielded better outcomes compared to liquidation.
Banking sector indicators lend further support to the government’s assessment of impact of the IBC. According to the Reserve Bank of India‘s June 2026 Financial Stability Report, Gross Non-Performing Assets at scheduled commercial banks have declined from 11.2 percent in March 2018 to 1.8 percent in March 2026.
Why realisation rates are so volatile
The year‑wise table annexed to the government reply shows sharp swings in recovery and realisation rates for financial creditors, with the figure falling to around 20 percent in FY 2025‑26. Legal experts warn that this volatility reflects the changing mix of stressed assets rather than a breakdown in the framework itself.
“Recovery outcomes in any given year are heavily influenced by factors outside the framework’s control, such as the stage at which a company is admitted into insolvency, how much value remains in the underlying business, the sector it operates in, and how long resolution takes,” said Anoop Rawat, partner and national practice head – insolvency & restructuring, Shardul Amarchand Mangaldas & Co..
For him, the meaningful benchmark is liquidation value, not total claims:
“A more meaningful lens is to measure recovery not against the total claims filed, but against the liquidation value of the enterprise at the time of admission; on that basis, the government’s own data shows creditors have realised 166.9 percent of liquidation value across all resolved cases.”
Bikash Jhawar, senior partner at Saraf and Partners, locates the volatility in a sectoral shift.
“Generally, it would be the nature of the asset which is being put out. Most asset rich CDs like in steel, power, infrastructure, manufacturing have already been resolved and it’s likely that a significant number of those now remaining are asset light businesses like EPC, other services, retail or trading/holding companies,” said Jhawar.
“These type of businesses erode value faster once they stop functioning at 100 percent since customers shift elsewhere, contracts get terminated/assigned, etc; and so for a buyer quite often there is not much of value, other than brand and some proprietary technology, or contingent claims, which are left. To an extent, the sectoral business cycle also matters. Steel or thermal power had a good run at different times in the last 10 years while being discounted at others,” Jhawar added.
“It is a combination of asset quality, market appetite, complexity of the process and outlook of stakeholders. A large real estate company in insolvency reduces the pool of prospective applicants. A midsize service based company without underlying assets may not attract bidders. Geo political complexities, challenges such as the COVID pandemic have also impact the process,” said Raunak Dhillon, partner at Cyril Amarchand Mangaldas.
“A decade on, all commercial stakeholders have become more dexterous in navigating the process and the recoveries/realization may also reflect how each individual process was dealt with. In one situation where recovery is bleak, a Bank may take a significant cut. In a better situation, it may not budge without a larger payment. Plans being held non compliant with IBC, despite an agreement between the COC and SRA is also a factor,” Dhillon added.
Next big fixes
Two academic studies cited in the MCA reply show that IBC’s impact goes well beyond headline recoveries. The IIM Bangalore study finds a sharp fall in overdue corporate loan accounts (by amount and number), overdue‑to‑normal transition times shrinking from 248–344 days to 30–87 days, and about a 3 percentage point reduction in borrowing costs for distressed firms versus non‑distressed peers, signalling faster resolution and a friendlier credit environment for viable but stressed borrowers.
The IIM Ahmedabad study tracks firms for three years after resolution and reports a 76 percent rise in average sales, improved EBITDA and net margins, roughly 50 percent growth in total assets and a 130 percent jump in CAPEX, alongside an almost threefold increase in aggregate market capitalisation, an 80 percent improvement in liquidity ratios and around 50 percent higher employee expenses with rising headcount, highlighting that resolved firms are investing, rehiring and regaining market confidence.
Together, these findings aid the government’s claim that, “IBC has enhanced the ease of doing business by providing a time bound and transparent mechanism for resolving insolvency, improving investor confidence and credit availability.”
A decade into the IBC, experts say the next phase of reform must address delays at the tribunal stage, uncertainty around employee claims and operational continuity, and the growing complexity of resolving distressed businesses. Government proposals such as the creditor-initiated insolvency resolution process may help preserve value and reduce pressure on the NCLT.
“The most transformative change on the horizon is likely to be the introduction of a creditor-initiated insolvency resolution process,” said Rawat. “If implemented well, this proposed hybrid framework has the potential to meaningfully shorten resolution timelines and preserve more value for all stakeholders.”
“Clarity on employee rights would be good. Multiple issues, whether and to what extent in a CIRP, can a RP terminate / furlough employees in a CD with limited operations. Also, vis-à-vis their claims, for instance, if principal sums of PF are not paid, and the department is charging penalties and damages which are not payable to employees, what is the status of such penalties and damages in the distribution waterfall,” said Jhawar. “Law is open on this and causes a fair amount of debate in each case, and concerns around value to be paid to stakeholders.”
“The law provides the timelines but the corresponding infrastructure to implement remains lacking. An increase in benches is one remedy. Another is bringing on IBC practitioners as NGT members, to enhance practical nous on the bench, and speed up the decision making process,” concluded Dhillon.
