Lok Sabha clears IBC amendment Bill, govt pushes faster insolvency fixes

The Lok Sabha on March 30 passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, introducing 12 changes to strengthen India’s insolvency resolution framework and improve outcomes for stakeholders. 

Introducing the Bill, Finance Minister Nirmala Sitharaman said the amendments aim to address practical challenges and align the Insolvency and Bankruptcy Code (IBC), 2016, with evolving global practices, drawing from implementation experience and judicial interpretations. 

The objective, she noted, is to maximise value while improving governance in the resolution process. The IBC has played a key role in sustaining stressed companies by enabling value realisation while keeping them as going concerns. 

Highlighting its impact, Sitharaman said banks have recovered ₹1,04,099 crore through various channels, with the IBC contributing ₹54,528 crore — or 52.3 per cent — of total recoveries, strengthening the financial health of the banking system. 

A key reform in the Bill is the replacement of the fast-track insolvency process with a creditor-initiated framework tailored for small companies, with shorter timelines. It also introduces provisions for out-of-court settlements and a debtor-in-possession model, allowing existing management to retain control under safeguards and defined timelines. 

Further, provisions for group insolvency and cross-border insolvency have been included to streamline complex cases and boost investor confidence, especially in multi-entity and multinational scenarios. 

Sitharaman said the Select Committee submitted its report in December 2025 with 11 recommendations, all of which have been accepted. An additional provision mandates the Committee of Creditors to record reasons for its decisions, aimed at enhancing transparency. 

Commenting on the development, Rishi Agrawal CEO and CO-Founder of Teamlease Regtech said: "The passage of the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, highlights an important '2.0' evolution of India’s credit culture... mandating the NCLT to admit applications within a strict 14-day window upon proof of default. We are significantly bolstering our regulatory capacity... aligning Indian law with UNCITRAL global standards... while requiring the Committee of Creditors to formally record reasons... This legislation preserves enterprise value... and reinforces India’s position as a predictable, transparent and globally competitive destination for investment." 

Meanwhile, Garima Saxena, Programme Manager, The Dialogue said, "What stands out in these draft amendments is that they are likely to increase both compliance complexity... making advisories and guidelines part of due diligence linked to safe harbour... The other important change is the attempt to extend the existing Part III process... affecting creators, citizen commentators, and ordinary users discussing public issues online."