Economic Survey 2025-26: IBC Delivers Higher Recoveries Over Earlier Regime Despite Delays

The Economic Survey 2025–26 has found that India's insolvency framework is delivering better returns to creditors than the system it replaced. At the same time, long delays continue to weigh on the resolution of stressed companies.

The Survey notes that average recovery rates under the Insolvency and Bankruptcy Code are now around 30%. This is a clear improvement over the 15 to 20% recoveries seen under the pre-IBC regime. It reflects a structural shift in how insolvency is handled in the country.

The Survey is also candid about the system's shortcomings. The IBC was designed as a time-bound process, with an outer limit of 330 days. In reality, cases are taking much longer. The average time taken for resolution has risen to 713 days. For cases closed in FY2025, the delay was sharper still, at an average of 853 days. The Survey described this as a deviation of over 150 per cent from the statutory timeline.

These delays, the Survey warned, are not just procedural. Time lost in insolvency proceedings often means value lost on the ground. As cases drag on, assets deteriorate. Employees leave. Customers shift to competitors. Supplier relationships weaken. The businesses the process is meant to save steadily erode.

A large part of the problem lies in capacity constraints. As of March 2025, the National Company Law Tribunal was dealing with nearly 30,600 pending cases. At current disposal rates, clearing the backlog would take almost 10 years. Only 30 NCLT benches are currently handling a wide range of corporate and insolvency matters.

The strain extends beyond the tribunal. Of the 4,527 registered Resolution Professionals in the country, only 2,198 have an active authorisation to work. The Survey said this shortage affects the system's ability to manage distressed companies efficiently during resolution.

Even so, the Survey underlined that the IBC marks a clear break from the past. Before the Code came into force, insolvency cases often stretched over six to eight years.

Under the current regime, timelines have come down to about two years. Even that, the Survey noted, remains far from what the law had originally envisaged.

The improvements, however, have begun to draw international attention. In December 2025, S&P Global upgraded India's insolvency regime from Group C to Group B, citing better recovery outcomes and improvements in institutional design.

At the same time, attempts to fast-track insolvency for smaller businesses have fallen flat. The pre-packaged insolvency process meant to rescue MSMEs saw only 14 admissions siince its introduction in 2021. 

Looking ahead, the Survey said the challenge is no longer the law itself. The legal framework has largely been tested and validated over the past decade. The next phase will depend on execution. Process reform and a rapid expansion of institutional capacity, especially at the tribunal and professional levels, will be key to faster and more meaningful resolutions.