Union Finance Minister Nirmala Sitharaman on Monday said that the Insolvency and Bankruptcy Code (IBC) is a key and crucial factor in improving the health of the Indian banking sector.
Sitharaman’s comments came during a debate on the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, which was passed in Parliament by voice vote.
The Lok Sabha on Monday passed the Insolvency and Bankruptcy (Amendment) Bill, 2025 as reported by a select committee. The bill seeks to further amend the Insolvency and Bankruptcy Code from 2016.
While piloting the bill for further amendments in the Lok Sabha, Sitharaman highlighted that the companies were doing well and their corporate governance practices had also improved after coming out of the insolvency resolution process.
“The Insolvency and Bankruptcy Code (IBC) has been a major factor in improving the Indian banking sector,” she said. With the amended code, the government aims to “maximise value and improve governance processes”.
Speaking on the bill ahead of its passage, Sitharaman said the proposed amendments to the IBC provide provisions for group cross-border insolvency proceedings.
The IBC (Amendment) Bill proposed 12 amendments to the IBC that came into force in 2016.
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₹4.11 crore earned: Sitharaman
Nirmala Sitharaman further said on the bill that more than half of the NPAs (Non-Performing Assets) have been recovered by the banks through the resolution process that the IBC has.
“Since December 2025, the Insolvency and Bankruptcy Code (IBC) has facilitated the resolution of 1,376 companies and allowed creditors to recover ₹4.11 lakh crore,” she said.
The Insolvency and Bankruptcy Code has led to better credit ratings for companies, Sitharaman said, adding that it was never intended to be a debt collection tool.
Sitharaman addresses the delay in solving the IBC
Talking about the controversial delays flagged by the opposition, Sitharaman said the major reason behind the delay in resolving the IBC is extensive litigation.
She said the new bill proposes sanctions to prevent abuse of the process.
Sitharaman further noted that the amendment to the IBC Act makes it mandatory to accept the insolvency petition within 14 days of the discovery of the company’s default.
The Center introduced a bill in the Lok Sabha to amend the Insolvency and Bankruptcy Code (IBC) on 12 August 2025, proposing a number of changes, including provisions to reduce the time taken for receiving applications for insolvency resolution.
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The bill was referred to a select committee of the Lok Sabha, which submitted its report in December 2025. It was introduced to address delays and bring procedural changes regarding insolvency and bankruptcy of a company or individual.
The IBC has been amended seven times so far. The government is struggling to address several issues, including resolution schedules and liquidations, resulting in value impairment, low realization for lenders and capacity constraints at the NCLT.
During a debate in the Lok Sabha on Wednesday, the opposition slammed the bill, arguing that it could not deliver a timely resolution due to the limited capacity of tribunals overloaded with cases. Meanwhile, BJP MPs defended the 2016 law and accused the opposition of clinging to the “license raj” mindset of the Nehruvian and Indira Gandhi eras.
Key things
- The draft law seeks to streamline insolvency processes and shorten resolution times.
- Government claims improved corporate governance and rate of return through IBC.
- The opposition raises concerns about the tribunal’s capacity and the delay in making rulings.
