S&P Global Upgrades India’s Insolvency Regime To Group B; Cites Stronger Creditor Protection

S&P Global Ratings announced on Wednesday that it has upgraded its jurisdiction ranking assessment of India’s insolvency regime from Group C to Group B, marking a significant endorsement of improvements under the Insolvency and Bankruptcy Code (IBC).

The upgrade reflects stronger creditor protection and enhanced predictability in resolution processes.

According to S&P, India’s insolvency framework is now assessed as ‘medium’ in creditor-friendliness, rising from its previous ‘weak’ category.

The rating agency cited a sustained record of successful creditor-led resolutions under the IBC as a key factor.

These developments, it noted, demonstrate substantial progress in timeliness, transparency, and recovery strength.

S&P emphasised that the IBC has fundamentally reshaped credit discipline in India, with promoters now facing the risk of losing control of their companies—an outcome rarely seen under older frameworks.

Higher Recovery Rates and Faster Resolutions

One of the strongest indicators of progress is the jump in average recovery values, which now exceed 30 per cent, compared with 15–20 per cent under earlier bankruptcy regimes.

Secured creditors, in particular, have benefited the most, often recovering significantly more than unsecured creditors.

S&P added that the IBC has sharply reduced the average resolution time for bad loans to around two years, compared with the previous average of six to eight years.

This acceleration, the agency noted, strengthens confidence in the predictability and efficiency of insolvency outcomes.

Despite the upgrade, S&P stated that India’s insolvency system still trails more mature Group A regimes and even some Group B jurisdictions.

Average recovery rates, while improved, remain comparatively low.

The agency also highlighted concerns around the voting structure, where secured and unsecured creditors vote as a single class—raising the risk that large unsecured debt could dilute secured creditor influence.

S&P noted that while the IBC provides safeguards such as mandatory liquidation benchmarks and court oversight, its long-term effectiveness requires further observation.

Need for Greater Predictability

The rating agency acknowledged that, although the average resolution period has improved, unpredictability persists due to legal complexities and procedural delays.

Enhancing consistency and ensuring faster adjudication will be the critical next steps for India.

S&P’s jurisdiction ranking assessment evaluates how effectively a country’s insolvency framework protects creditor interests and how predictable its insolvency outcomes are.

The agency classifies countries into Group A, Group B, and Group C, with Group A offering the strongest protection.

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