MUMBAI, India — In India, the vultures are circling.

These vultures are investors looking for opportunities in distressed assets and bad debts. For years they had avoided investing in India, put off by a creakingly slow legal system and a labyrinthine bureaucracy.

But a new bankruptcy law and a move this month to give India’s central bank expansive powers to tackle bad debt have excited investors both here and abroad who think investing in India’s distressed market could produce double-digit returns.

“The new bankruptcy laws have been given teeth, which finally makes Indian credit markets attractive to foreign investors,” said Saleem Siddiqi, founder of Musst Investments, a family office in London. Mr. Siddiqi is creating an Indian merchant bank to invest in middle-market corporate loans.

A test of the new approach came this month, when a tribunal in New Delhi dismissed an appeal by a steel company, Innoventive Industries, which was arguing, among other claims, that a state law allowed it to suspend its liability temporarily. The tribunal ruled that the country’s new bankruptcy law prevailed.