Recovery under IBC remains lackluster as lenders take 67% haircut
The motive of the IBC to conclude processes at the earliest is yet to materialise with the 1,258 CIRPs that yielded resolution plans taking 724 days on average, according to the report.
The haircut taken by creditors under the Insolvency and Bankruptcy Code process continues to remain high at 67 per cent till June with creditors realising ₹4 lakh crore from overall debt resolution of ₹12.2 lakh crore.
In the June quarter, about ₹20,000 crore of debt was resolved under IBC resulting in realisations of ₹6,200 crore (32 per cent). The quarter saw a resolution of five large cases with admitted claims of more than ₹1,000 crore and the realisation of 27 per cent was lower than overall trends seen in recent history, said Kotak Institutional Equities.
The realisation values are relatively low due to weaker assets where there are incomplete projects or sectors with very poor demand from buyers.
Liquidation remains the most common path of closure for cases under the insolvency resolution process. As of June-end, 87 per cent of ongoing cases have passed 270 days since admission, with another 5 per cent crossing 180 days. Hence, the number of cases facing liquidation is likely to stay high.
The motive of the IBC to conclude processes at the earliest is yet to materialise with the 1,258 CIRPs that yielded resolution plans taking 724 days on average, according to the report.
New amendment
The government has recently introduced IBC Amendment Bill proposal to cut timeline for admission of cases based purely on proof of default in 14 days for faster resolution of stressed assets.
Sonam Chandwani, Managing Partner KS Legal & Associates said the proposed changes in the Bill risks being more cosmetic than curative unless the systemic bottlenecks of inadequate NCLT infrastructure and judicial backlog.
In practice, she said timelines under the code are breached not merely at the admission stage but throughout the resolution, often due to creditor disputes, dilatory tactics by promoters and overburdened tribunals.
Vijay K Singh, Senior Partner at S&A Law Offices, said the amendment does not provide for a deemed admission system to automatically admit cases upon proof of default, and there are no penalties for parties who stall proceedings.
The adversarial approach adopted by stakeholders, ranging from defaulting promoters, dissenting creditors and government departments led to frequent filings before NCLT, NCLAT and even Supreme Court which stall the resolution process and undermines the objective of time-bound resolution, he said.
The new reforms does not address heavy backlogs and understaffing at NCLT and NCLAT which typically means that even improved laws could be weakened by practical delays, he said.
Published on August 21, 2025
