Halving of recoveries against admitted claims to 23 per cent in FY26 from 46 per cent in FY25 under the Insolvency and Bankruptcy Code (IBC) is a cause for concern, according to rating agency ICRA.

Realisations reduced significantly in FY26, led by the significant drop in recoveries to 22 per cent in H2 (second half) of FY26 from 63 per cent in H2 FY25, per a study by the agency.

ICRA noted that the number of resolution plans (RPs) approved by the National Company Law Tribunal (NCLT) under the IBC dipped to 225 cases in FY26 from 259 cases approved in FY25.

At the same time, the number of cases admitted in the corporate insolvency resolution process (CIRP) declined by 6 per cent to 679 from 724.

Manushree Saggar, Senior Vice President and Group Head, Structured Finance Ratings, ICRA, observed that 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.

“After the strong recovery witnessed in FY25, realisations dipped sharply with Q3 (October-December) 2025-26 seeing the worst haircut of 80 per cent. While some improvement was noted in Q4 (January-March) 2025-26 with recovery rates inching up to 23 per cent, this was well below the recovery rates seen in 2024-25 as well as 2025-26.” she said.

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.

Also, while various measures have been undertaken to place greater onus on the NCLT to resolve cases in a timebound manner, it continues to be affected by manpower shortfall, leading to elongated timelines and consequently significant haircuts.

Exceeding IBC deadline

Further, almost 78 per cent of the ongoing CIRP cases had exceeded 270 days, post admission by the NCLT, as on March 31, 2026. The average resolution time worsened to 744 days as on March 31, 2026 from 713 days as on March 31, 2025, significantly exceeding the deadline provided by the IBC.

The report said despite the reforms implemented by the Insolvency and Bankruptcy Board of India (IBBI) in March 2025, aimed at improving the efficiency of the auction process under liquidation, recovery rates dipped to 4 per cent in FY26 from 5 per cent in FY25 with timelines worsening to 531 days as on March 31, 2026 from 508 days as on March 31, 2025.

Real estate and construction continued to account for the highest number of cases admitted in FY26. Although the IBBI has come up with some amendments to the IBC, more

changes are proposed, given the wider socio-economic impact of stalled RE projects, ICRA said.

Empirical data suggests that recoveries in case of successful RPs (31 per cent recovery) have been higher than for cases resolved through liquidation (4 per cent recovery), per the report.

An encouraging sign was lower liquidations in H2 FY26, resulting in a resolution to liquidation ratio (Number of cases where the RP is approved by the NCLT divided by the number of cases for which liquidation orders are passed by the NCLT) of 1.11 against 0.77 in H1 FY26.

ICRA attributed the decline in recovery rates in FY26 to a few large cases (admitted claims of more than ₹1,000 crore), wherein 24% recovery was achieved against

the admitted claims. These cases accounted for 95% of the recovery amount but a minuscule 8 per cent of the number of approved RPs in 2025-26.

Thus, ICRA believes that an improvement in recoveries for large cases would be critical to the overall success of the code.

“Also, small value cases (underlying default of more than ₹10 crore) have an 80 per cent share in the number of CIRPs initiated by financial creditors. Thus, a dedicated mechanism for CIRPs for small entities is needed since Pre-packaged Insolvency Resolution Process (PPIRP), introduced in August 2021, has seen limited success; only 18 applications were admitted as on March 31, 2026, of which RPs had been approved for 10 cases,” ICRA said.

Published on May 28, 2026