India Ratings and Research (Ind-Ra) opines that India’s insolvency resolution landscape is likely to focus more on recovery efficiency as resolution-to-liquidation ratios increase, despite declining realisations. 

Realisations declined to around 20% in 3QFY26 (2QFY26: 25%), marking a three-quarter decline. However, resolutions to liquidation cases spiked to 1.6x in 3QFY26 (2QFY26: 0.7x), indicating a possible shift in recovery strategies. Ind-Ra however, notes that recovery timelines remain lengthy, with 76% of ongoing CIRP (Corporate Insolvency Resolution Process) cases exceeding statutory limits (30 September 2025: 77%) and addressing this may take time.

Realisations Likely to Stay Weak, despite Higher Resolution Counts: Ind-Ra expects realisation levels to remain subdued unless the structural weaknesses within the insolvency ecosystem are addressed. According to the Standing Committee on Finance, while the Insolvency and Bankruptcy Code (IBC) has improved insolvency outcomes, delays, late-stage filings, and valuation shortcomings continue to dilute recovery value. Strengthening institutional capacity, improving transparency, and simplifying the processes focused on micro, small, and medium enterprises are critical to making the framework more effective and timely. This is consistent with Ind-Ra’s view that despite stronger statutory tools such as IBC, recovery outcomes in India continue to be influenced more by execution gaps than by the design of the frameworks themselves. On the other hand, the ratio of resolutions to liquidation cases spiked to 1.6x in 3QFY26 (2QFY26: 0.7x), highlighting a trend of widening gap between resolution volume and value recovery.

During 3QFY26, operational creditors (OCs) reported 25% realisation from CIRP’s yielding resolution plan, reflecting no change from 3QFY25. Recovery for corporate debtors (CDs) too remained around 18% in 3QFY26, while that for financial creditors (FCs) increased to 32% from 31% in 3QFY25, but still within the 31%-34% range seen since FY23.

Resolution Preference to Deepen as Creditors Prioritise Value Preservation: Ind-Ra believes creditor behaviour is likely to increasingly favour resolutions over liquidations, with the resolution‑to‑liquidation ratio rising sharply to 1.6x in 3QFY26 (2QFY26: 0.7x), marking a shift toward restructuring-led value preservation. While the spike in this quarter could be one-off, the ratio has been trending upwards and a sustained ratio above 1x would indicate maturing creditor strategies and growing confidence in resolution mechanisms.

IBC contributes the highest share of system recoveries, continuing as the single-most important recovery channel for large-ticket corporate stressed assets as well as security receipts (SRs) backed by corporate non-performing assets (NPAs). The Reserve Bank of India (RBI) highlights that realisable value under IBC was 170.1% of liquidation value as of end-September 2025 (September 2024: 161.1%), which is directionally supportive for SR pools backed by large-ticket corporate NPAs, where the primary strategy is IBC-led resolution rather than liquidation-driven outcomes.

Committee of Credits’ Oversight Reforms Could Lift Transparency and Protect Recoveries: The norms proposed by the Insolvency and Bankruptcy Board of India in its latest discussion paper are likely to strengthen creditor oversight and enhance recovery predictability, as they require the Committee of Creditors to formally record deliberations on expected recoveries, market discovery, and applicant capability. Moreover, mandatory going concern assessments, clearer rules on delayed claims, and exclusion of related OCs aim to reduce disputes and improve procedural discipline.

Timelines to Remain Prolonged: While IBC remains the dominant recovery channel for stressed assets, timelines for both resolutions and liquidations are likely to stay stretched, given persistent bottlenecks in adjudication, valuation, and execution processes. Timeline for CIRP resolutions has been increasing for FCs, OCs, and CDs, now reaching its highest period since FY21. The timeline recorded in 3QFY26 was 745 days for FCs, 751 days for OCs, and 623 days for CDs.

The average time taken for resolution through liquidation during 3QFY26 was 533, 539, and 452 days for FCs, OCs, and CDs, respectively.

Recovery for CIRPs yielding liquidation continues to decline for all stakeholders, now around the lowest levels since FY21. The share of ongoing cases under CIRP increased for the 270 days and above category to 76% in 3QFY26 compared to 74% in 3QFY25 (2QFY26: 77%).

Liquidations Will Continue Dominating Closures: Unless structural bottlenecks are addressed, liquidation is expected to remain a preferred closure route—dominating at 42% of the total cases closed (3QFY25: 44%). The closure through the various routes has shown minimal change compared to 3QFY25.

Note: Section 12A was introduced into the IBC by Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 w.e.f. 6 June 2018. It gives power to Adjudicatory authority (AA) to allow withdrawal of case post admission under CIRP if the creditors and applicant have agreed to a settlement. In case the committee of creditor (CoC) is formed post admission, it requires COC with 90% voting share to agree to the applicant’s settlement scheme for AA approval of withdrawal.