How litigation shackled bankruptcy reform and forced fire-sale of bad loans

While the bankruptcy code was a step forward, it would have been more effective if it had included restrictions on the scope for litigation, bankers and investors said

When India introduced new bankruptcy resolution rules in 2016, government officials and investors said they expected debt-burdened state-owned banks to clear up some of their bad loans and create a dynamic market in restructured debt.

Ultimately, they said, they hoped the reform would remove an impediment to higher economic growth.

Almost three years later, those hopes have been badly dented. Litigation has tied down some big restructuring deals and bankers are starting to sell bad debts at fire sale prices rather than wait for the system to work better.

That is bad news for Prime Minister Narendra Modi, who is keen to get