Insolvency Recoveries Plummet Nearly 50% in FY26 Amid Rising Case Delays

IBC Reforms Continue to Face Challenges

The recoveries under the Insolvency and Bankruptcy Code (IBC) against admitted claims have seen a significant decline in FY 2025-26. According to a recent report by rating agency Icra, the recoveries nearly halved to 23 per cent from 46 per cent in the preceding financial year. This decline is attributed to rising delays in the resolution process.

The number of cases admitted in the corporate insolvency resolution process (CIRP) also declined by 5 per cent to 679 from 724 in the previous year. The report highlights a significant drop in recoveries to 22 per cent in H2 2025-26 from 63 per cent in H2 2024-25. This decline is a cause for concern, as it indicates a weakening of the IBC's effectiveness in resolving corporate debtors.

Since the introduction of the IBC in 2016, a total of 8,987 corporate debtors have been admitted. By March 2026, 64 per cent of the CIRPs had been resolved, either through a successful RP (resolution plan), withdrawal, or liquidation.

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The IBC continues to face challenges, including long resolution timeframes, high haircuts for lenders, and a sizeable share of liquidation cases. Realisations have dipped sharply in FY 26, with the third quarter seeing the worst haircut of 80 per cent. Icra Senior Vice President and Group Head, Structured Finance Ratings, Manushree Saggar, highlighted the importance of implementing the revised code to improve the success rate.

As of March 31, 2026, almost 78 per cent of the ongoing CIRP cases had exceeded 270 days, post admission by the NCLT. The seventh IBC amendment bill was passed in April 2026 to address these shortcomings, but Icra believes that the actual implementation of the revised code will be critical to improving the success rate.

Empirical data suggests that recoveries in case of successful RPs have been higher than for cases resolved through liquidation. The report highlights the following comparison:

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An encouraging sign was the lower liquidations in H2 2025-26, resulting in a resolution to liquidation ratio of 1.11 against 0.77 in H1 2025-26. The decline in recovery rates in 2025-26 was due to a few large cases with admitted claims of more than Rs 1,000 crore, wherein 24 per cent recovery was achieved against the admitted claims.

These large cases accounted for 95 per cent of the recovery amount but a minuscule 8 per cent of the number of approved RPs in 2025-26. According to Icra, an improvement in recoveries for large cases would be critical to the overall success of the Code.

The average resolution time worsened to 744 days as of March 31, 2026, from 713 days as of March 31, 2025, significantly exceeding the deadline provided by the IBC. Real estate and construction continued to account for the highest number of cases admitted in 2025-26.