India’s public sector banks are recouping significant sums from written-off loans amid a sustained decline in write-offs and improving asset quality, with recovery efforts increasingly stabilising their financial health.
YES Securities has argued that the banking sector’s recovery from written-off loans remains an important earnings support, but not all lenders are equally exposed. In a note cited by Business Today, the brokerage said Bank of Maharashtra looks stronger than its headline numbers suggest because it has a wider return-on-assets buffer. It also said State Bank of India, Bank of Baroda and Indian Bank have the lowest dependence on recoveries from written-off accounts among the eight public sector banks it tracked.
The broader backdrop is that India’s state-run lenders have been recovering more money from old bad loans and technically written-off accounts as asset quality improves. The New Indian Express reported that public sector banks recovered more than ₹35,000 crore in fiscal 2026 through bankruptcy courts, property auctions, one-time settlements and Lok Adalats. SBI alone recovered ₹10,054 crore, while its fresh write-offs were the lowest in six years, according to that report.
That improvement has coincided with a sharp fall in write-offs across the sector. PSU Watch and The Economic Times reported that several lenders, including Bank of Baroda, Union Bank of India, Punjab National Bank, Central Bank of India, Indian Overseas Bank and Indian Bank, posted their lowest write-offs in up to eight years in fiscal 2026. The decline has been linked to lower slippages, a shrinking pool of legacy stressed assets and stronger provision coverage ratios, which reduce the need to clean up balance sheets through write-offs.
Against that backdrop, YES Securities said the amount still sitting in written-off accounts remains meaningful for most state-run banks. It said those balances were equivalent to roughly 6.4% to 7.4% of loan books for most lenders by the end of fiscal 2026, with SBI an outlier at 3.3%. The brokerage added that recoveries in fiscal 2026 ranged from 5.3% to 11.1% of opening balances, suggesting the pool will take years to run off rather than disappearing quickly.
YES Securities said that even if recoveries from written-off accounts were stripped out entirely, Bank of Maharashtra would still have delivered a return on assets of 1.4% in fiscal 2026. By contrast, SBI and Indian Bank would have remained close to 1%, while Bank of Baroda would have slipped to about 0.9%. Punjab National Bank, Bank of India and Canara Bank would have looked weaker still, the brokerage said. On that basis, it named Bank of Baroda, SBI, Bank of Maharashtra and Indian Bank as the PSU banks it preferred, while it was least enthusiastic about RBL Bank and IDFC First Bank.
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