Recovery rates under India’s Insolvency and Bankruptcy Code (IBC) slipped marginally to 31.63% in the third quarter of FY26 from 32.44% in the previous quarter, underscoring persistent haircuts of nearly 68% faced by creditors, according to CareEdge Ratings. While case admissions rose year-on-year, prolonged resolution timelines and structural delays continue to weigh on recovery efficiency, even as the government prepares to introduce amendments aimed at strengthening and speeding up the insolvency framework.

Also, the third quarter witnessed the stock of ongoing CIRPs going down to 1,879 cases – lower than the 1,900 level witnessed over the past several quarters. Additionally, the manufacturing sector continues to account for the largest share of cases (37%), according to a report by the Financial Express.

Though last week, Insolvency and Bankruptcy Board of India (IBBI) chairperson Ravi Mital said that unlike the general belief that just about 30-32% of the claims admitted by the creditors have been realised under IBC, the actual recovery is 94%. “When a company goes into insolvency, we do its enterprise valuation. Based on that fair valuation, we have recovered 94%. IBC cannot be held responsible for deterioration (in asset value) for a period when it was not even involved,” Mital said recently.

The ratings agency said that the prolonged resolution and liquidation timelines remain a structural drag, with most cases extending well beyond prescribed limits, which weigh on recovery efficiency and erode value. The industry is expecting some improvement in the IBC framework once the proposed amendments take effect.

Recently, the finance minister Nirmala Sitharaman told Parliament that the government is considering introducing the IBC (Amendment) Bill, 2025 in the second half of the Budget session that begins on March 9. The proposed amendments seeks to overhaul the insolvency framework by introducing new concepts like cross-border insolvency, group insolvency and creditor-initiated insolvency resolution process (CIIRP) that will enable faster, out-of-court settlements.

“A key structural shift is the extension of creditor primacy beyond CIRP into liquidation, through enhanced Committee of Creditors (CoC) supervision and control over the appointment and replacement of liquidators. This is expected to improve commercial decision-making in liquidation, which has previously delivered weak recoveries,” as per CareEdge.

Further, the Bill tackles systemic delays by proposing time-bound disposal of appeals at the National Company Law Appellate Tribunal (NCLAT) level, an area that has materially undermined resolution timelines and creditor confidence. under the Bill, the voting threshold for unrelated financial creditors to initiate a pre-packaged insolvency is 66%, which will be reduced to 51%.

“These reforms could materially improve resolution efficiency and recovery outcomes over the medium term, reinforcing the IBC’s credibility as an effective stress-resolution framework,” the agency noted.