Parliament on Wednesday passed amendments to the Insolvency and Bankruptcy Code (IBC) aimed at speeding up the resolution of distressed companies and reducing backlog of cases, with Finance Minister Nirmala Sitharaman stressing that the aim is to revive companies rather than liquidate them, according to PTI.The Rajya Sabha approved the Insolvency and Bankruptcy Code (Amendment) Bill, 2026 by voice vote, after it was passed by the Lok Sabha on March 30.Responding to a debate in the Senate, Sitharaman said IBC is designed to preserve enterprise value and resolve financial pressures in a market-driven manner.“(IBC) was never intended to be a debt recovery tool. Recovery values are, by the way, a by-product. The IBC process is market-driven.“Recoveries reflect the quality of the underlying assets and the commercial viability of the distressed project,” she said, in response to concerns about asset write-downs and recovery rates.As of December 2025, IBC has facilitated the resolution of 1,376 companies, enabling recovery of Rs 4.11 lakh crore, with financial creditors recovering more than 34 per cent of their claims.Recoveries depend on sectoral conditions and asset quality, Sitharaman said, adding that the code achieves 94.95 per cent of fair value on acceptance, while recoveries exceeding 171.54 per cent of liquidation value reflect the distressed nature of companies entering the process rather than flaws in the framework.
She said IBC has strengthened the banking sector by enabling asset recovery and improving balance sheets.“One of the concrete things I can say to India is that the Code has actually contributed to improving the health of our banking sector. One of the reasons why the Indian banking sector itself has improved is the way IBC recovered the assets, went through the process and returned the money to the banks,” PTI quoted her as saying.Banks recovered Rs 1,04,099 crore through various channels, of which Rs 54,528 crore, or 52.3 per cent, came through the IBC route.Citing a World Bank report, Sitharaman said reforms in India’s insolvency system have improved creditor recovery rates from 26.5 cents to 71.6 cents on the dollar.“Even just a few years after its introduction, it has been recognized all over the world,” she said.The minister said that the amendments aim to make the law more responsive to evolving economic needs.“The IBC was not brought in with the intention of winding up companies. It was brought in to address the pressure that companies are facing and give a resolution that will make them return to some form and then reach the position that they were managing earlier with a fair number of guardrails,” she said.Key changes include faster acceptance of insolvency applications, with adjudication limited to proof of default and greater reliance on information facilities.Applications must be accepted within 14 days if default is proven, while appeals before the National Company Law Appellate Tribunal (NCLAT) must be resolved within three months.The amendments also aim to strengthen the liquidation process by increasing oversight of creditors, ensuring the independence of liquidators and removing procedural interferences.An enabling framework for group insolvency and cross-border insolvency has been introduced to improve investor confidence and align with global best practice.The draft law replaces the underutilized fast-track process with a creditor-initiated insolvency framework that allows insolvency proceedings to be initiated out of court and follows the debtor-in-possession and creditor-in-control models, while providing guarantees.Stricter timelines and penalties have also been proposed to deter lawsuits and frivolous delays.MSMEs have been exempted from disqualification under Sections 29A, 29A and 29A, allowing promoters to participate in the resolution process and help sustain small businesses, Sitharaman noted.The Insolvency and Bankruptcy Code, which was enacted in 2016, has undergone seven amendments so far as the government seeks to improve the framework in line with industry requirements.