When Subhash Chandra, the founder of the Zee media empire, appeared before India’s National Company Law Tribunal to settle his personal guarantees, the numbers read like a typo. Facing claims exceeding 22,000 crore rupees, he offered to settle his obligations for just 6 crore rupees, representing a haircut of 99.97%. Though a five-member bench initially allowed the settlement, higher appellate bodies stepped in to stay the order. Yet the episode was no aberration. It was merely a theatrical glimpse into the mechanics of Indian corporate debt resolution.
Over the past decade, India’s financial architecture has undergone a quiet but sweeping reallocation of wealth. Through a combination of accounting write-offs, insolvency concessions, tax cuts, and direct subsidies, the Indian state and its banking sector have absorbed trillions of rupees in corporate liabilities. Proponents argue these measures were necessary to clean up bank balance sheets and incentivize industrial investment. But official statistics show that despite unprecedented relief, India’s manufacturing engine remains stubbornly sluggish.
The Clean-Up Mirage
The most substantial drain on the banking sector stems from non-performing assets. Between the 2015-16 and 2025-26 fiscal years, Indian banks wrote off a staggering 1,876,593 crore rupees in bad loans. Technically, a write-off is not loan forgiveness. It is an accounting procedure where banks remove bad debts from their active balance sheets by offsetting them against profits. Government ministers regularly cite declining non-performing loan ratios as evidence of healthier bank books. Yet this cleanup was largely achieved through balance-sheet adjustments rather than aggressive loan recovery. In practice, once an asset is written off in India, only a fraction of the principal is ever recovered.
Parallel to accounting write-offs is the formal resolution process under the Insolvency and Bankruptcy Code, introduced in 2016. The code was designed to create a swift, transparent market for distressed assets. However, data from 1,419 resolved cases reveals a severe pattern of value destruction. Total financial claims in these cases exceeded 14.4 trillion rupees, but creditors recovered just 4 trillion rupees. The remaining 10.4 trillion rupees was absorbed as haircuts, representing an average loss of over 70% of claim values.
Individual corporate cases highlight the scale of these concessions. In the Videocon Industries resolution, lenders claimed 64,838 crore rupees but recovered just 2,962 crore rupees, accepting a 95.4% haircut. Deccan Chronicle creditors absorbed a 91.7% loss, recovering 678 crore rupees on claims of 8,180 crore rupees. Reliance Infratel yielded claims of 41,563 crore rupees down to just 3,720 crore rupees in recovery, representing a 91% haircut. Jaypee Infratech creditors settled for 1,100 crore rupees on claims of 9,783 crore rupees, marking a loss of nearly 89%. Out of 29,523 crore rupees in total debt, Alok Industries saw creditors recover 5,052 crore rupees after taking an 82.9% haircut. Amtek Auto creditors recovered 2,615 crore rupees against claims of 12,641 crore rupees, accepting a 79.3% haircut. Monnet Ispat settled for 2,892 crore rupees against claims of 11,115 crore rupees, an almost 74% loss. Even Bhushan Power & Steel, which performed relatively well compared to its peers, saw creditors recover 19,350 crore rupees on claims of 47,158 crore rupees, leaving lenders with a 59% haircut.
Capital Transfer and Fiscal Incentives
As distressed firms undergo insolvency proceedings, their underlying assets are frequently sold at deep discounts. In many cases, healthier conglomerates acquire these assets for a fraction of their original construction cost. Across ten insolvent companies with total debt exceeding 61,832 crore rupees, resolution plans resulted in acquisitions by the Adani Group for approximately 15,977 crore rupees. While this process returns productive capital to operation, it fundamentally shifts the burden of historical debt onto state-backed creditors and depositors.
Beyond banking losses, direct fiscal support to the corporate sector has accelerated. In September 2019, the government reduced the base corporate tax rate from 32% to 22% for existing companies, and down to 15% for new manufacturing entities. Between 2014 and 2024, official budget documents record total foregone corporate tax revenues of approximately 8.22 trillion rupees. Meanwhile, direct production subsidies under the Production Linked Incentive scheme allocate 1.97 trillion rupees across manufacturing sectors, alongside 127,000 crore rupees for semiconductor manufacturing, Rs 1.07 lakh crore as Employment Linked Incentive, Rs 84,084 crores as Samudra Manthan Incentive, Rs 62,500 crores for Mobile Phones Manufacturing, and rupees Rs 40,000 crores for electronic components.
The Investment Paradox
The theoretical justification for write-offs, haircuts, and tax concessions is supply-side economics: lowering the cost of capital and boosting corporate profits should drive fresh private investment, create factory jobs, and expand industrial capacity.
Yet macroeconomic data tells a different story. In 2010, manufacturing accounted for 17% of India’s GDP. By 2023, despite trillions of rupees in bad-loan resolutions, tax cuts, and production subsidies, manufacturing’s share of output had fallen to 13%.
Rather than reinvesting their windfall into domestic expansion, many firms used tax savings and debt relief to deleverage balance sheets, buy back shares, or build corporate cash reserves. Private capital expenditure has remained muted because industrial investment depends on consumer demand, not just financial incentives. When stagnant wages and indirect tax burdens—such as the Goods and Services Tax—weaken broad purchasing power, corporations have little incentive to build new factories, regardless of how cheap credit or tax rates might be.
Without structural reforms to ensure accountability in lending and to stimulate consumer demand, the cycle of state-funded corporate relief threatens to remain an expensive holding action rather than an engine for industrial growth.