The effectiveness of the insolvency framework in India is being questioned as recovery rates for lenders under the Insolvency and Bankruptcy Code (IBC) continue to decline.

Banks are faced with a difficult decision: opting out of the IBC process means they may not be able to recover funds from defaulted borrowers, while engaging with the system often results in minimal returns.

This situation reflects the challenges that the Indian banking sector is currently facing as they navigate the complexities of the insolvency process. The declining recovery rates highlight the need for a reevaluation of strategies to improve the efficacy of the IBC and achieve better outcomes for creditors.