Finance Minister Nirmala Sitharaman on Monday said the Insolvency and Bankruptcy Code (IBC) has emerged as a crucial player in improving India’s banking sector, highlighting its role in keeping stressed institutions alive, enhancing valuations, and protecting jobs.
Replying to the Insolvency and Bankruptcy Code (Amendment) Bill 2025 in the Lok Sabha, she said, “IBC has contributed a lot in terms of keeping institutions alive… companies have found resolution, their values have been brought up, valuation improved, and the workforce has been protected.”
She stressed that the resolution of stressed assets under the Code has had a distinct positive outcome for the banking ecosystem.
Citing data, Sitharaman said that by December 2025, the IBC had facilitated the resolution of 1,376 companies, enabling creditors to recover around Rs 4.11 lakh crore. “The IBC has been a very big, crucial role player in improving India’s banking sector,” she said.
The Minister said the Code has proven highly effective as a channel for recovery of non-performing assets (NPAs) for scheduled commercial banks.
She noted that while banks have recovered around Rs 1,499 crore through various channels, the IBC alone contributed a significant 54.3 per cent of total recoveries.
Highlighting key provisions of the amendment bill, Sitharaman said it seeks to strengthen the existing insolvency framework and replaces the underutilised fast-track Corporate Insolvency Resolution Process (CIRP) for small companies. “The fast-track process was not being utilised fully… now we are bringing a creditor-initiated insolvency framework with out-of-court settlements,” she said.
She explained that the new framework introduces a hybrid model of “debtor in possession and creditor in control,” adding, “Earlier it was more creditor-in-control alone, now debtor will still be sitting on the board.”
The amendments also introduce enabling provisions for group insolvency and cross-border insolvency, aimed at promoting investor confidence and aligning domestic practices with global standards.
Pointing to behavioural changes among borrowers, Sitharaman said, “The credible threat of losing ownership has nudged debtors to settle even before admission.” She said that as many as 32,179 cases were settled prior to formal admission under the IBC process.
Clarifying the intent of the law, she said, “IBC is a framework for rescuing viable businesses and resolving financial stress while preserving enterprise value. It was never intended to be a debt-recovery tool.” She emphasised that the process is market-driven and focused on value maximisation.
On valuation outcomes, the Finance Minister noted, “IBC actually realises nearly 94.95 per cent of the fair value of the company,” adding that fair value is determined at the time of admission and evolves during the resolution process.