Lok Sabha passes insolvency law amendments; Sitharaman says Bill will help maximise value for stakeholders

The Lok Sabha on Monday (March 30, 2026) passed a Bill to amend the insolvency law to provide for strict timelines, an out-of-court settlement option and enable the framework for cross-border insolvency processes.

Piloting the bill in the Lok Sabha, Finance and Corporate Affairs Minister Nirmala Sitharaman said that 12 amendments are being made in the Insolvency and Bankruptcy Code (IBC), which came into force in 2016, that would help maximise the value for stakeholders and improve the governing process itself.

Parliament Budget Session LIVE updates Amendments seek to strengthen the existing insolvency framework, as well as address practical challenges, and incorporate evolving global best practices, the minister said, and added that the law has been a major factor in improving the health of the country's banking sector.

The Lower House cleared the Insolvency and Bankruptcy Code (Amendment) Bill, 2025, as reported by the Select Committee.

On August 12, 2025, the government introduced the bill in the Lok Sabha to amend the Insolvency and Bankruptcy Code (IBC), proposing a raft of changes, including provisions to reduce the time taken for admission of insolvency resolution applications.

The Bill was referred to a select committee of the Lok Sabha, which submitted its report in December 2025. Ms. Sitharaman stated that all the committee's recommendations have been accepted. IBC has been amended seven times so far.

The Bill replaces the underutilised fast-track process with a new creditor-initiated insolvency framework, featuring out-of-court initiation, debtor-in-possession and creditor-in-control model, where management continues to vest in the existing Board of Directors or partners with safeguards, and defined timelines.

Also, there is an enabling framework for group insolvency and cross-border insolvency to promote investor confidence and align domestic practices with best international practices, Ms. Sitharaman said.