IBC Recoveries Peak at 70% in Q4 FY2025 Amid Fewer Liquidations, but Resolution Delays and NCLT Bottlenecks Persist: ICRA

ICRA reports a record 70% recovery under the IBC in Q4 FY 2025 driven by large cases, even as resolution delays and NCLT inefficiencies continue to hamper overall effectiveness.

The latest analysis by ICRA indicates a significant improvement in recoveries under the Insolvency and Bankruptcy Code (IBC) in Q4 FY2025, with recoveries reaching a record 70% against admitted claims—the highest since the IBC’s implementation in 2016. This peak recovery was largely driven by a few large corporate insolvency resolution processes (CIRPs), where admitted claims exceeded ₹1,000 crore, and these cases contributed approximately 90% of total recoveries despite constituting only 10% of the approved resolution plans.

FY2025 also saw resolutions outpace liquidations, a reversal of the historical trend, pushing the resolution-to-liquidation ratio to 1.9 in Q4 and 0.9 for the full year, compared to 0.6 in FY2024. However, the number of admitted CIRPs declined sharply by 28%, and average resolution time worsened from 679 days to 713 days, significantly exceeding the IBC's prescribed limit of 270 days. Nearly 78% of ongoing CIRPs as of March 31, 2025, have already breached this deadline.

ICRA highlighted that despite systemic delays and judicial interventions, the IBC continues to outperform alternative recovery mechanisms, with successful resolution plans yielding approximately 33% recovery versus only 4% in liquidations. The report emphasised the need for strengthening institutional capacity, particularly the NCLT, and streamlining small-value cases through mechanisms like the Pre-packaged Insolvency Resolution Process (PPIRP), which has seen limited uptake so far. Amendments introduced in Q4 FY2025 by IBBI to improve the auction and liquidation frameworks are expected to enhance asset sales, boost bidder interest, and drive higher realisations going forward.

Nonetheless, persistent delays and frequent legal challenges remain a key concern, impacting lender confidence and investor sentiment in distressed assets. ICRA has reiterated the critical role of regulatory clarity, stakeholder accountability, and timely execution in ensuring the long-term success and credibility of the IBC regime.