Insolvency Cases Drop in FY2025 Amidst Challenges in Recovery Processes

In the financial year 2025, fewer companies entered insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), according to a report by credit rating firm ICRA. Data shows a significant 28% drop, with only 724 companies admitted for insolvency compared to 1,003 in the preceding year.

Not only did insolvency admissions decline, but there was also a slight decrease in approved resolution plans, falling from 263 to 259. Introduced in 2015, the IBC aims to efficiently manage financial distress, safeguard creditors, and promote entrepreneurship. Despite record recoveries of 70% for some lenders in the last quarter, average recovery rates remain low, with lenders experiencing a 67% haircut on average.

The IBC process has historically faced extended timelines, high liquidation rates, and substantial haircuts. Despite positive trends in the latest fiscal year, recovery through successful resolution plans was only 33%. The emphasis remains on timely and transparent resolutions, yet 78% of cases exceeded 270 days post admission, as of March 2025. Large cases accounted for notable recoveries; however, efficiency improvements, such as the Pre-packaged Insolvency Resolution Process (PPIRP) as well as recent IBC amendments, are deemed vital for future success.

(With inputs from agencies.)