IBC Amendment Bill 2025: Faster Bankruptcy Resolution via Creditor-Led Framework | Nirmala Sitharaman

New Delhi – Finance Minister Nirmala Sitharaman on Wednesday introduced a bill in the Lok Sabha aimed at amending the Insolvency and Bankruptcy Code (IBC), with a focus on accelerating bankruptcy resolution processes and fostering greater trust between creditors and debtors. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, proposes a creditor-initiated framework largely based on out-of-court settlements, a significant shift from the current system. This move comes as average resolution times have been creeping upwards, eroding asset value and creating uncertainty in the market.

The proposed amendments, the seventh since the IBC’s inception in 2016 and the first since 2021, seek to streamline existing processes and introduce new concepts to address procedural delays and interpretational issues. According to data cited in the Lok Sabha, approximately 8,654 corporate debtor cases have been resolved through the Corporate Insolvency Resolution Process (CIRP) since the IBC’s implementation, with around ₹4 lakh crore recovered. Still, the average resolution time between April and December 2025 rose to 764 days, excluding periods exempted by the National Company Law Tribunal (NCLT), compared to 597 days as of March 2025. News On Air reported on the discussion in Parliament.

A Shift Towards Creditor Control

A core element of the bill is the introduction of a creditor-led resolution process with a 150-day deadline – significantly faster than the current 330-day statutory limit (including litigation). This new framework would allow a majority of unrelated financial creditors, alongside the debtor, to reach an informal agreement on a rescue plan. The role of the NCLT would be limited to affirming a moratorium and approving the plan. Crucially, the corporate debtor would retain management control of the company under the supervision of a resolution professional. Lenders will have the option to choose between this new framework and the existing Corporate Insolvency Resolution Process (CIRP).

This represents a fundamental shift in approach, moving away from what some see as an adversarial system towards one that prioritizes collaboration and trust. Anoop Rawat, national practice head (insolvency and restructuring practice) at Shardul Amarchand Mangaldas, described the amendments as marking a “transition…from mistrust to trust, from a regime punishing lack of governance to a regime motivating governance and from an adversarial approach to a conciliatory one based on coordination for insolvency resolution.”

Addressing Cross-Border and Group Insolvencies

Beyond speeding up domestic resolutions, the bill also proposes a framework for handling cross-border insolvency cases, aligning with a model United Nations law. This would enable creditors to manage situations where a bankrupt company has assets or creditors overseas and to seek cooperation from other jurisdictions. What we have is increasingly important as Indian companies expand globally and engage in more international financial transactions.

The bill also tackles the complexities of resolving insolvency cases involving corporate groups – a common scenario where multiple entities are interconnected through ownership or financial relationships. The aim is to create a more coordinated and efficient process for dealing with these situations, preventing fragmentation and maximizing recovery for creditors.

Impact on Stakeholders

The proposed changes are likely to have a broad impact on various stakeholders. For financial creditors – banks and other lenders – the faster resolution times and greater control over the process could lead to improved recovery rates and reduced losses. For corporate debtors, retaining management control during the resolution process could provide a greater incentive to negotiate a viable rescue plan. However, the bill has drawn some criticism. Samajwadi Party MP Virendra Singh reportedly alleged that the provisions are discriminatory, offering unequal relief to small traders, farmers, and large corporations.

Investors may view the amendments positively, as a more efficient insolvency framework could reduce systemic risk and improve the overall investment climate. However, the success of the new framework will depend on its effective implementation and the willingness of creditors and debtors to engage in good-faith negotiations.

The Evolution of the IBC

The IBC was initially hailed as a “game-changer” for the Indian economy when it was implemented in 2016. YouTube coverage of the Lok Sabha proceedings shows the bill being discussed alongside the Finance Bill 2026. It aimed to address the long-standing problem of non-performing assets (NPAs) and provide a streamlined process for resolving bankruptcies. Congress MP Rahul Kaswan noted that while the system was initially fast, it has become more uncertain over time. The amendments reflect an ongoing effort to refine the law and address emerging challenges.

The rise in NPAs during the NDA government was also raised during the parliamentary discussion, with allegations that loan waivers were disproportionately benefiting large corporations while farmers were excluded. This highlights the political sensitivities surrounding the IBC and the need to ensure fairness and transparency in its application.

What’s Next: Parliamentary Approval and Implementation

The bill has been moved for consideration and passing in the Lok Sabha. Following approval in the lower house, it will need to be passed by the Rajya Sabha (the upper house of Parliament) before becoming law. The timeline for this process is uncertain, but This proves expected to be completed in the coming weeks.

Once enacted, the Ministry of Corporate Affairs will be responsible for implementing the amendments, including issuing detailed guidelines and clarifying the new procedures. The effectiveness of the new framework will be closely monitored by stakeholders, and further adjustments may be necessary based on practical experience. The Lok Sabha is also resuming discussion on the Finance Bill 2026, with Nirmala Sitharaman expected to move it for passage, as reported by ANI News.