Sitharaman defends IBC citing higher recoveries and post-resolution performance of firms

Finance Minister Nirmala Sitharaman on Monday, March 30, 2026, defended the Insolvency and Bankruptcy Code (IBC) in Parliament, citing high realizations from distressed assets, recovery of creditors and turnaround of companies exiting the resolution process.

Responding to the debate on the Insolvency and Bankruptcy (Amendment) Bill, 2026, the Finance Minister said that the aim of the IBC is not debt relief but instead the rescue of viable businesses and addressing their financial stress.

“IBC is a framework for saving viable businesses and resolving financial stress while preserving corporate value,” Ms. Sitharaman explained. “It was never intended to be a debt recovery tool. Rescue values ​​are a byproduct. The real goal is to rescue businesses that can survive and make sure we solve the financial problems they face.”

Market driven process

Therefore, he said, the IBC process is market-driven and recoveries reflect the underlying asset quality and commercial viability of the distressed business.

“IBC actually realizes 94.95% of the fair value of the company at the time of admission,” Ms. Sitharaman said. “Realization also exceeds 171.54% of liquidation value, which indicates levels of recovery, reflects the distressed state of the business at entry and is not a failure of the resolution framework.”

He added that as of December 2025, IBC has facilitated resolution of 1,376 companies and enabled creditors to recover ₹4.11 lakh crore. Financial creditors also saw an improvement, with more than 34% of their claims outstanding. IBC first came into force in 2016.

Improved credit scores

Ms. Sitharaman also said the IBC had led to improved credit scores of companies emerging from the process and that the proportion of companies resolved rather than liquidated had increased over the years.

“In the financial year (FY) 2017-18, five companies went into liquidation for every one that was resolved,” he said. “However, in the 2024-25 financial year, this ratio has now improved significantly and is close to one.”

Another success of the process, the minister said, was that the “credible threat” of losing possession through the IBC process pushed borrowers to resolve 32,179 cases before entering the formal process, addressing underlying defaults worth Rs 14.62 lakh crore.

The Lok Sabha passed the bill to amend the bankruptcy law to provide strict timelines, out-of-court settlement option and enable framework for cross-border insolvency processes. The IBC has been amended seven times since its inception in 2016.