Hi everyone,  

Welcome to the 154th edition of The Pattern, a weekly where we dive into the latest from the world of economy, technology and finance. Let’s get started!  

Have you ever had that nightmare where you are stuck going down a spiral staircase that never ends? Step after step, you are rushing down but with no destination in sight and you feel confined in an infinite loop. For Indian lenders, that's no longer just a bad dream. It has become a ground reality. 

The promise that once was  

When a business needs money to grow, it borrows from lenders like banks or NBFCs, promising to repay with interest. But not every business sees the light of day. Some fail due to market crashes, poor decisions, or mismanagement turning these unpaid loans into NPAs. 

In 2016, when the Insolvency and Bankruptcy Code (IBC) was introduced, it was seen as a bold leap. It was the beacon of hope that was here to fix India's messy, slow-moving bankruptcy system and give lenders a fighting chance to recover their dues. For the first time, there was a time-bound, court-monitored mechanism that promised to either revive or liquidate distressed companies efficiently. 

Lenders welcomed it as a light at the end of the tunnel. Initially, it worked. But nearly a decade later, that light seems to get dimmer every passing day. 

Lenders welcomed it as a light at the end of the tunnel. Initially, it worked. But nearly a decade later, that light seems to get dimmer every passing day. 

Sure, FY25 did bring a flicker of hope—with over ₹67,000 crore recovered from bankrupt companies, the highest-ever annual recovery under IBC, according to National Company Law Tribunal data. That’s a 42% jump from the ₹47,206 crore recovered the year before. But scratch the surface, and the cracks are still deep. 

From promise to problem  

Lenders hoped the IBC would be a cakewalk. What they didn’t anticipate was that it would turn out to be a maze. 

Let's start with the numbers. Of the  $133 billion in bad debt processed through the IBC, creditors have recovered only 31%. In some cases, banks have received less than 10% of their claims. Worse, 75% of ongoing cases have overshot the 270-day resolution timeline, and nearly one-third have ended in liquidation. This means a total wipeout of the value. 

This became a common pattern. 

Creditors wait. Courts delay. Cases drag. Then they start over again. 

The chaos within this loop  

But what's recently sent shockwaves through the lending ecosystem is a new legal twist that reopens cases everyone thought was closed. (cue gasp)  

Earlier this month, the Supreme Court overturned JSW Steel's acquisition of Bhushan Power & Steel. This was closed four years ago, with $2.7 billion paid to creditors. The money was paid. The asset changed hands. But the court ruled it didn't meet IBC norms and ordered liquidation. 

Here's the kicker: SBI and PNB weren't lenders to JSW Steel for this deal. They were the largest creditors to Bhushan Power & Steel itself. When JSW paid ₹19,350 crore under the resolution plan, that money went directly to BPSL's lenders—with S BI receiving ₹9,800 crore and PNB ₹6,100 crore . Now, with the deal under threat, they might have to return that money. Years later. After having already written it into their books. 

This could wipe out 13% of JSW's revenue . Yes, you read that right! 

Trilegal , a leading law firm in India, didn't mince words: "The judgment will severely erode investor faith… and considerably impair the bankruptcy code as a resolution strategy." 

That's a heavy blow—not just to lenders' balance sheets, but to their confidence in the system. 

Is lending headed for a lockdown?  

Lenders are the backbone of India's credit system. If they lose trust, everything slows down—from MSME funding to infrastructure loans. 

Here's how this broken insolvency process is hurting them: 

• Unpredictable outcomes:  If a deal isn’t really done, even years later, then how can lenders plan their next move? There’s no closure, just more uncertainty. 

• Delayed recovery and capital stuck:  Every unresolved insolvency case locks up crores of rupees—money that could’ve gone to someone building something, maybe even turning a profit. Instead, it just sits there. Worse, lenders aren’t even recovering what they’re owed. 

• Loss of investor confidence:  Who wants to buy a stressed asset if the deal can be cancelled four years later? Strategic buyers walk away, losing interest. 

Change needs to catch up—fast  

After nine years, India doesn't just need tweaks to the IBC, it demands a reform of the code that is merging with realism. 

Technology can help calm the chaos. Early warning systems can flag trouble before a company collapses, while smart data analytics help lenders act faster and smarter. Blockchain can make records tamper-proof and transparent, reducing disputes. Asset tracing tools ensure nothing goes missing. The government also needs to fast-track the creation of integrated tech platforms that bring all IBC processes—from case tracking to claim verification—under one roof. The system needs to be consistent, transparent, and easy to navigate. 

Closing statement  

The IBC was never going to be a silver bullet. It was supposed to be the sturdy ladder that helped lenders climb out of the bad-loan trap.  

Today, for lenders, the IBC feels less like a sturdy ladder and more like that endless spiral staircase—dizzying, directionless, and daunting. To power India's lending ecosystem, predictability and trust needs to be restored. That means more than just speeding things up—it means drawing a line under every resolved case and saying, “case closed” . 

Because in lending, time is money. And right now, lenders are running out of both. 

Reading List:  

1. Plan in works to catch 'mule' accounts in real time  

2. FICCI urges RBI to retain NBFC-centric co-lending model, warns changes may hurt credit, jobs  

3. Unsecured loans: Improved outlook fuels expansion  

4. NBFCs raise concerns over planned co-lending rules      

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on X here and follow FinBox on LinkedIn to always get all updates. 

Cheers, 

Mayank