India Tightens Insolvency Framework with New Bill

The Lok Sabha on Monday approved a significant amendment to the insolvency law, aimed at streamlining processes and setting strict timelines. The bill, presented by Finance and Corporate Affairs Minister Nirmala Sitharaman, introduces a creditor-initiated insolvency framework while replacing the less effective fast-track process.

The 2025 amendment proposes 12 changes to the Insolvency and Bankruptcy Code (IBC), which has been instrumental in improving the health of the country's banking sector. Notable adjustments include out-of-court settlements and a model that ensures the management stays with the existing Board of Directors. These updates align with global best practices.

Stricter timelines and penalties for frivolous complaints are introduced to expedite resolutions. Provisions ensure workmen get priority among creditors, reinforcing the government's commitment to protect employee interests during insolvency proceedings. This major reform aims to bolster efficiency and confidence among investors.