India's corporate credit cycle is expected to remain stable in the near term, supported by strong corporate balance sheets, moderate debt levels and a capital expenditure cycle largely funded through companies' own cash flows, according to a report by Kotak Institutional Equities. The brokerage said these factors are expected to limit the risk of a significant deterioration in lenders' asset quality.
The latest data under the Insolvency and Bankruptcy Code (IBC) showed that fresh corporate stress remained broadly stable. A total of 177 Corporate Insolvency Resolution Processes (CIRPs) were admitted in the first quarter of FY27, compared with 668 cases during the whole of FY26. Financial creditors initiated 116 of the 177 cases, indicating a continued shift away from insolvency cases being primarily initiated by operational creditors.
Despite improvement in resolution outcomes, the effectiveness of the IBC continues to be affected by delays in the resolution process and low recovery levels. Of the 1,500 cases resolved so far, the average resolution time was 757 days, well above the stipulated timelines. As of June 2026, nearly 76 per cent of ongoing CIRPs had crossed the 270-day threshold, highlighting the continued delays in completing insolvency proceedings.
Recovery levels have remained weak with creditors realising around ₹4.6 lakh crore against nearly ₹14 lakh crore of debt resolved cumulatively under the IBC. While recoveries were about 167 per cent of liquidation value, they represented only around 31 per cent of admitted claims, resulting in an overall haircut of nearly 70 per cent. In the case of Jaiprakash Associates, which was resolved in the fourth quarter of FY26, creditors recovered only about 23 per cent of admitted claims of nearly ₹60,600 crore.
Manufacturing accounted for around 40 per cent of admitted resolution plans, making it the largest contributing sector. The resolution-to-liquidation ratio has increased steadily to an all-time high of 1.28, indicating a growing shift towards resolution rather than liquidation. Despite this improvement, liquidation remains the most common closure route with a cumulative 3,074 corporate debtors moving into liquidation compared with 1,484 resolutions. Recent reforms aimed at speeding up case admission through Information Utility records and providing greater flexibility in structuring resolution plans could help improve resolution timelines and recovery outcomes.
