A Parliamentary Standing Committee on Finance has reviewed the performance of the Insolvency and Bankruptcy Code (IBC) after eight years and raised concerns over haircuts, valuation practices, delays, and post-resolution hurdles. 

• This report was submitted by  Lok Sabha’s Select Committee, which is examining the Insolvency and Bankruptcy Code (IBC) Amendment Bill, 2025,  which was introduced in Lok Sabha in August 2025.

Key Concerns Identified

• Large Haircuts: The committee flagged high haircuts taken by creditors, often due to distressed sales and poor valuation standards.
• Valuation Challenges: Assets are often valued on liquidation potential rather than enterprise value, leading to undervaluation and reduced recovery.
• Limited Bidders: A restricted pool of quality resolution applicants reduces competition, lowering final bid values.
• Lack of Transparency: The Committee raised concerns over opaque valuation processes, insufficient accountability of valuers and liquidators, and the absence of uniform SOPs.
• Accountability Issues: The Committee noted gaps in Resolution Professionals’ accountability, affecting process quality and outcomes.
• Post-Resolution Challenges:
• • Clean Slate Issues: Companies often struggle to restart operations due to delays in obtaining regulatory clearances.
  • Financing Barriers: Banks hesitate to lend to resolved entities since they remain labelled as defaulters, limiting revival prospects.
• Regulatory Vacuum: The lack of a comprehensive cross-border insolvency mechanism under IBC causes losses in high-value cases, delays settlement, and weakens asset recovery.

Recommendations to Strengthen IBC

• Enterprise-Level Valuation: The panel recommends shifting valuation towards enterprise value to better reflect the debtor’s operational potential and reduce haircuts.
• Global Bidding: To enhance competition, the Committee recommends expanding the bidder pool through international outreach, encouraging global participation.
• Standard Operating Procedures: SOPs should clearly define the roles of liquidators, registered valuers, include audit trails, and provide for post-resolution valuation reviews.
• Transparent Mechanism:  The panel suggests establishing a transparent online ‘no dues’ certificate system, for Companies emerging from resolution.
• The committee strongly supported the establishment of a Cross-Border Insolvency Framework, terming it critical for India’s globalised economy.

Check Out UPSC CSE Books

Visit PW Store

DOWNLOAD PDF