How do banks recover bad debts?

When the borrower cannot repay the banks in a stipulated time, it begins the process of bad debt recovery. Banks may recover bad debts by selling collateral, or may even take legal action. To resolve the problem of bad debt with public sector banks, the Government passed Insolvency and Bankruptcy Code (IBC) Bill. You can read about the Non Performing Assets (NPA) – Reasons, Classification, Impact, and Measures to Control NPA in the given link.

Further readings:

1. RBI – Reserve Bank of India [UPSC Indian Economy Notes]
2. Bad Banks – Idea Proposed by Indian Banking Association (IBA) Due to COVID-19