IBC recoveries halve in FY26, amid rising delays, high haircuts: ICRA Report
Mumbai, May 28
Recoveries under the Insolvency and Bankruptcy Code declined sharply in 2025-26 as prolonged resolution timelines, high haircuts and a large number of liquidation cases continued to impact the insolvency process, according to a report by ICRA.
The report said recoveries against admitted claims fell to 23 per cent in 2025-26 from 46 per cent in 2024-25, mainly due to a steep drop in recoveries during the second half of the financial year.
At the same time, the number of resolution plans approved by the National Company Law Tribunal (NCLT) under the IBC declined to 225 cases in 2025-26 from 259 cases in the previous year. Cases admitted under the Corporate Insolvency Resolution Process (CIRP) also fell 5 per cent to 679 from 724.
According to the report, recoveries declined to 22 per cent in the second half of 2025-26 compared with 63 per cent in the same period of the previous year.
Manushree Saggar, Senior Vice President and Group Head, Structured Finance Ratings, ICRA, said, "The IBC, which completed 10 years in May 2026, continues to be plagued by long resolution timeframes, high haircuts for lenders and a sizeable share of liquidation cases."
She added, "Although the seventh IBC amendment bill was passed in April 2026 to address shortcomings, ICRA believes that the actual implementation of the revised code would be critical to improve the success rate."
The report noted that nearly 78 per cent of ongoing CIRP cases had crossed 270 days after admission by the NCLT as of March 31, 2026. The average resolution timeline also increased to 744 days from 713 days a year earlier, exceeding the deadline prescribed under the IBC framework.
ICRA said manpower shortages at the NCLT continued to affect time-bound resolution of cases, leading to delays and higher haircuts for lenders.
The report further stated that recoveries were higher in successful resolution plans at around 31 per cent, compared with around 4 per cent in liquidation cases.
Large cases with admitted claims above Rs 1,000 crore accounted for nearly 95 per cent of the recovery amount in 2025-26, but represented only 8 per cent of approved resolution plans. ICRA said improvement in recoveries from large cases would be "critical to the overall success of the code."
The report also highlighted the limited success of the Pre-packaged Insolvency Resolution Process (PPIRP), introduced in 2021 for small entities. As of March 31, 2026, only 18 applications had been admitted, with resolution plans approved in 10 cases.
Real estate and construction sectors continued to account for the highest number of admitted cases during 2025-26, the report added.
— ANI
Reader Comments
Recoveries halving from 46% to 23% is alarming. Banks are already struggling with NPAs. But I think the real issue is that many cases end up in liquidation, where recovery is just 4%. The code needs to focus more on early resolution and plugging loopholes that promoters exploit.
Interesting how 95% of recovery comes from just 8% of cases (those above ₹1000 crore). Small and medium cases are getting neglected. And PPIRP for small entities has only 10 approved resolutions in 5 years? That's pathetic. Need better mechanisms for MSME resolution.
Real estate and construction dominating the cases is no surprise. Many builders used IBC as a shield against homebuyers. The system needs to prioritize homebuyer claims. Also, haircuts of 70-80% for banks are too common now. Something is fundamentally broken.
Manpower shortage at NCLT is a chronic issue. We have one of the highest caseloads per judge in the world. The government should have doubled NCLT benches by now. Without that, no amount of amendments will speed up resolutions. 🤷♂️
I'm worried about the impact on credit culture. If banks recover only 23%, they'll become more risk-averse and tighten lending. That hurts honest businesses too. The IBC needs a balance between creditor rights and giving companies a genuine chance to revive.
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