New Delhi, Apr 1: The Insolvency and Bankruptcy Code has helped in improving the health of the Indian banking sector, Finance and Corporate Affairs Minister Nirmala Sitharaman said on Wednesday.
Parliament passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2026, after the Rajya Sabha approved the bill with a voice vote. It was approved by the Lok Sabha on March 30.
Replying to a short discussion on the bill in the Rajya Sabha, the minister said the World Bank, in its 2019 report, observed that reforms to India’s insolvency regime increased creditor recovery rates from 26.5 cents to 71.6 cents a US dollar.
“Even just after a few years of its introduction, it has been recognised world over,” Sitharaman said.
The Act was enacted in 2016, and since then, it has undergone seven amendments.
On the reasons for the new amendments, Sitharaman said that IBC is a law which pertains to economic activity, and the legislation has to respond to the growing needs of the economy. The government has been making periodic amendments, which were required by industry and stakeholders.
“One concrete thing that I can say for India is that the Code actually has contributed to improving the health of our banking sector. One of the reasons why India’s banking sector has actually gotten better in itself is because of the way in which IBC has recovered assets and gone through the process and given back money to the banks,” the minister said.
Banks have recovered a total of Rs 1,04,099 crore through various channels, and out of the total amount, the IBC channel alone contributed a significant Rs 54,528 crore, accounting for 52.3 per cent of the total recoveries, she said.
The minister further said the intent of the IBC is not to liquidate companies but to give a resolution which will keep them going.
“IBC was not brought with the intention of liquidating companies. It was brought in to address the stress that the companies are facing and give a resolution which will make them come back to some form and then attain the status that they were earlier running with quite a few guardrails,” she said.
She also added that there are eventually some companies where no resolution is possible in spite of repeated trying, so they go for liquidation.
In the current set of amendments, she said the government aims to bring in expeditious admission of insolvency applications by limiting adjudication to the existence of default and greater reliance on information utilities and sets statutory timelines for adjudicatory authorities to reduce delays.
Another important aspect is to strengthen the liquidation process through enhanced creditor oversight, ensuring independence of the liquidator and removal of procedural overlaps.
The bill also replaces the underutilised fast-track process with a creditor-initiated insolvency framework, featuring out-of-court initiation, a debtor-in-possession model with creditor oversight and defined timelines.
It also introduces an enabling framework for group and cross-border insolvency, aimed at improving investor confidence and aligning domestic processes with international best practices.
The minister also informed the upper house that Micro, Small and Medium Enterprises (MSMEs) are exempted from disqualification under Sections 29A, 29AC, and 29AH of the IBC.
This provision enables existing promoters to participate in the resolution process and facilitates the rescue of businesses, ensuring that small players do not lose their enterprises when they enter insolvency, she said.
