India’s IBC Reforms: Game-Changer for Business Insolvency and Debt Recovery

A sweeping overhaul of India’s Insolvency and Bankruptcy Code (IBC) is on the horizon. The proposed amendments aim to slash corporate debt resolution times in half and dramatically boost recoveries for lenders. According to committee chairperson Baijayant Panda, the changes represent a transformative “reboot” for the nation’s financial ecosystem.

The Lok Sabha select committee tabled its report on the IBC (Amendments) Bill 2025 last week. The Ministry of Corporate Affairs is expected to introduce a revised bill during the upcoming budget session of Parliament for final passage.

Streamlining Process and Enforcing Timelines

The primary goal of the amendments is to enforce strict compliance with resolution deadlines. Currently, cases often stretch beyond two years, far exceeding the 330-day limit. A key change involves replacing the word “may” with “shall” in legal provisions, making adherence to timelines mandatory for authorities.

Another significant reform concerns the approval process from the Competition Commission of India (CCI). Under the new rules, only the winning bidder for a distressed company will need CCI clearance. This is expected to save considerable time during the resolution process. According to reports from Reuters, such procedural efficiencies are critical for reviving investor confidence.

Addressing Sector-Specific Challenges and Small Business Relief

The reforms also tackle complex sectoral issues, particularly in real estate. The committee has expressed caution against project-specific insolvency, a concept suggested by the Supreme Court. Chairperson Panda argued that such an approach contradicts the IBC’s core principle of displacing defaulting management. He stated that the Real Estate Regulatory Authority (RERA) should be the primary mechanism for resolving project-specific distress.

For micro and small enterprises, the bill offers crucial relief. It proposes lowering the voting threshold for a pre-packaged resolution scheme to 51% of creditors, down from 66%. This tailored framework allows business owners to retain control while working with creditors on a debt plan. This model is better suited for smaller entities with limited resources.

The upcoming amendments are a game-changer for India’s financial landscape. They promise to cut resolution delays, unlock greater value from distressed assets, and provide tailored solutions for small businesses. The overhaul of the Insolvency and Bankruptcy Code is poised to inject efficiency and speed into the heart of India’s corporate revival mechanism, benefiting the entire economy.

Thought you’d like to know

What is the main goal of the new IBC amendments?

The main goal is to drastically cut the time taken to resolve corporate insolvency. The reforms aim to enforce strict timelines and streamline procedures to halve the current resolution duration and improve recovery amounts for banks and creditors.

How will the changes help small businesses?

Small and micro enterprises will benefit from a lower approval threshold for a pre-packaged insolvency scheme. They need only 51% of creditor votes to proceed, allowing them to restructure debt while the original owners remain in control of the business.

What is the issue with real estate insolvency?

The committee has cautioned against project-specific insolvency for real estate. It argues that resolving only one failed project while the promoter continues to run the rest of the company contradicts the IBC’s fundamental rule of changing the defaulting management.

How much debt has been recovered under the IBC so far?

According to official statements, the IBC has helped recover between ₹50,000 to ₹60,000 crore per year of sunk investments. The new amendments aim to increase these recovery figures dramatically.

What are group and cross-border insolvency provisions?

For the first time, the amended bill introduces specific provisions for group insolvency and cross-border insolvency. This addresses major gaps in the existing framework, allowing for coordinated resolution of financially interconnected companies and cases with international assets.