Creditors realised Rs 4 lakh crore under IBC till September: RBI report

The recent RBI report highlighting a recovery of Rs 4 lakh crore through the Insolvency and Bankruptcy Code (IBC) by September 30, 2025, is a testament to the transformative impact of this landmark legislation on India's economic landscape. This impressive figure, coupled with the resolution of over 78% of corporate insolvency resolution processes (CIRPs) and the rescue of 3,865 corporate debtors, underscores the IBC's success in fostering a more disciplined credit culture and enhancing the ease of doing business in the country.

To truly appreciate the IBC's significance, one must understand the challenging pre-IBC era. Prior to its enactment in 2016, India's insolvency framework was fragmented, inefficient, and often favored debtors. Laws like the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act), and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), existed, but they often led to protracted legal battles, significant value erosion, and low recovery rates for creditors. The 'debtor-in-possession' model prevalent then meant that defaulting promoters often retained control, further delaying resolution and aggravating the problem of Non-Performing Assets (NPAs) in the banking sector. By 2015, NPAs had reached alarming levels, posing a systemic risk to India's financial stability.

The IBC, enacted on May 28, 2016, was a paradigm shift. It introduced a unified, time-bound, and creditor-in-control framework for resolving insolvency and bankruptcy cases. The core philosophy is to prioritize the revival of financially distressed companies over their liquidation, ensuring that the maximum value is realized for stakeholders. The report's findings—Rs 4 lakh crore recovered and thousands of companies rescued—demonstrate that this shift is yielding tangible results.

Several key stakeholders are central to the IBC's operation. **Creditors**, both financial (banks, non-banking financial companies) and operational (suppliers, employees), are the primary beneficiaries, gaining a more robust mechanism for debt recovery. **Corporate Debtors** themselves benefit from a structured process that can lead to resolution and a fresh start, rather than prolonged uncertainty. **Insolvency Professionals (IPs)**, a new cadre of professionals, play a crucial role in managing the insolvency process, from interim management to liquidation. The **Insolvency and Bankruptcy Board of India (IBBI)** acts as the regulator, overseeing IPs, insolvency professional agencies, and information utilities, ensuring the integrity and efficiency of the ecosystem. The **Adjudicating Authorities**, primarily the National Company Law Tribunal (NCLT) for corporate insolvencies and the National Company Law Appellate Tribunal (NCLAT) for appeals, provide the judicial oversight. The **Government** and the **Reserve Bank of India (RBI)** are vital in shaping policy and monitoring the financial system's health.

The IBC's significance for India is multi-faceted. Economically, it has improved India's 'Ease of Doing Business' ranking by providing a clear exit mechanism for failed businesses and bolstering investor confidence. It has been instrumental in addressing the NPA crisis, freeing up capital for productive lending, and strengthening the balance sheets of banks. This efficient capital reallocation is crucial for sustained economic growth. Socially, it promotes accountability among corporate entities and reduces the moral hazard associated with perpetual defaults. Politically, it signifies the government's commitment to structural reforms and good governance in the corporate sector.

Historically, the IBC represents the culmination of decades of efforts to reform India's debt recovery laws. It moved India from a 'debtor-friendly' to a 'creditor-friendly' regime, emphasizing resolution over liquidation. This aligns with global best practices and strengthens India's integration into the global financial system. The shift from 'debtor-in-possession' to 'creditor-in-control' has been a game-changer, empowering creditors to drive resolution processes.

Looking ahead, the future implications of the IBC are profound. It is expected to further enhance financial discipline, making businesses more prudent in managing debt. There is potential for continuous refinement of the code, including the introduction of cross-border insolvency frameworks and further streamlining of processes, especially for Micro, Small, and Medium Enterprises (MSMEs). The success of the IBC will continue to attract foreign direct investment by assuring investors of a predictable legal framework for dispute resolution and debt recovery. This robust insolvency regime is critical for India's ambition to become a $5 trillion economy.

From a legal standpoint, the IBC, 2016, is the core legislation. It draws its legislative competence from **Entry 9** of the Union List under **Article 246** of the Constitution, which deals with 'Bankruptcy and Insolvency'. While not directly a constitutional article, the IBC implicitly supports fundamental rights like **Article 19(1)(g)** (Right to practice any profession, or to carry on any occupation, trade or business) by ensuring a fair and efficient exit mechanism for businesses, thereby fostering entrepreneurship. It works in conjunction with other laws like the Companies Act, 2013, and has largely superseded older laws for corporate insolvency. The RBI's role in financial stability and NPA management also links to its statutory powers under the RBI Act, 1934, and its broader mandate for economic stability.