New Delhi, May 21 -- Creditors have become more willing to lend to distressed firms at lower interest rates since the Insolvency and Bankruptcy Code (IBC) was adopted, showing they are more confident of recovering dues in case of a default, the Insolvency and Bankruptcy Board of India (IBBI) said in its FY25 update on outcomes of debt resolution. The IBC came into force on 1 December 2016.

In the update, released on Tuesday, IBBI chairman Ravi Mital cited a study conducted by IIM Bangalore that showed there has been a 3.3% reduction in the cost of debt for distressed firms since the IBC was adopted. Mital termed this an "improved credit environment for distressed firms".

"A possible explanation could be that distressed firms significant...