How India recovered Rs 4.32 lakh crore from bankrupt companies through Its Insolvency Law
Babushahi Bureau
New Delhi, May 28, 2026 — India’s insolvency system has undergone a major transformation over the last decade, helping banks and creditors recover more than ₹4.32 lakh crore from financially stressed companies till March 2026, according to the Government of India.
The government on Thursday highlighted how the Insolvency and Bankruptcy Code (IBC), introduced in 2016, has changed the way bankrupt or debt-ridden companies are handled in the country. It also underlined the importance of the newly passed Insolvency and Bankruptcy Code (Amendment) Act, 2026, aimed at making the process faster, clearer and more effective.
Before the IBC came into force, India’s bankruptcy system was spread across several laws and tribunals. Companies facing financial trouble had to deal with multiple legal frameworks, including company law, debt recovery tribunals and secured creditor laws such as SARFAESI. This often resulted in confusion, long delays and falling value of company assets.
In many cases, insolvency proceedings dragged on for years, making it difficult for banks and lenders to recover their money while businesses continued to deteriorate.
To address these issues, the Government introduced the Insolvency and Bankruptcy Code, 2016, creating a single and time-bound system to deal with insolvency cases involving companies, partnership firms and individuals.
One of the biggest changes introduced by the IBC was shifting control from company owners to creditors during the resolution process. Under the system, financial creditors form a Committee of Creditors (CoC), which takes key decisions regarding the future of the stressed company, including approving revival or restructuring plans.
The law also fixed timelines for completing insolvency cases. The Corporate Insolvency Resolution Process (CIRP) was designed to be completed within 180 days, extendable up to 330 days in exceptional circumstances. If no solution is found within the given period, the company proceeds towards liquidation.
According to the government, the new Insolvency and Bankruptcy Code (Amendment) Act, 2026 seeks to further improve the system by reducing delays, strengthening creditor oversight and bringing greater procedural clarity.
Officials said the reforms are aimed at making the insolvency process more efficient, predictable and focused on reviving viable businesses while protecting the interests of all stakeholders.
The insolvency framework is regulated by the Insolvency and Bankruptcy Board of India (IBBI), which oversees insolvency professionals and institutions operating under the Code.
Experts believe the IBC has played a significant role in improving credit discipline and boosting investor confidence in India’s financial system by ensuring that financially distressed companies are resolved in a structured and time-bound manner.