Lok Sabha Passes Key IBC Amendment Bill 2025 to Strengthen Insolvency Framework

While introducing the bill for discussion, Finance Minister Nirmala Sitharaman said in the Lok Sabha, "We are bringing the IBC Amendments Bill, which seeks to strengthen the existing insolvency framework under the Insolvency and Bankruptcy Code of 2016. Practical challenges and incorporating evolving global best practices are being addressed, and also the experience that we've gained between 2016 and now, in between several amendments which have taken place, are being kept in mind."

The Minister highlighted that the government took into account "those experiences and the jurisprudence also laid out by both the courts, the tribunal and the courts are taken on board so that we can maximise the value for shareholders and improve the governing process itself."

The Finance Minister highlighted how the IBC played a critical role in the economy by keeping stressed institutions alive. She noted that the code allowed companies to have their values brought in and improved while maintaining them as ongoing concerns.

She emphasised that the IBC served as a main factor in improving the overall health of the Indian banking sector by resolving stressed assets.

Regarding the recovery of non-performing assets (NPAs), Sitharaman informed the House that banks recovered a total of Rs 1,04,099 crore through various channels. "The IBC has proven very effective as a channel in recovering the NPAs for the scheduled commercial banks," she said. She further clarified that "the IBC channel alone contributed a significant Rs 54,528 crore, that is 52.3% of all assets recovered from NPAs."

The proposed bill replaces the underutilised fast-track process with a new creditor-initiated insolvency framework that features reduced timelines for small companies. This new model includes out-of-court settlement initiations and a debtor-in-possession approach.

Sitharaman explained that under this framework, "the management continues to vest in the existing board of directors or partners, but with safeguards and defined timelines." This represents a shift from the previous model, where the creditor primarily maintained control. Additional amendments introduce an enabling framework for group insolvency and cross-border insolvency to promote investor confidence.

"The report of the select committee, which had done extensive consultation, was presented in the Lok Sabha on 17th December, 2025; it made 11 major recommendations, all of which have been accepted by the government. Over and above that, we have brought in one more recommendation. And in that, the Committee of Creditors shall record the reasons that's a 12th Amendment that we are adding on," the Finance Minister said.

She told the House that the requirement for the committee to record its reasons "will improve transparency" in the resolution process as the House considers the final bill.

- ANI