SBI Digitises Stressed-Asset Tracking to Speed Up Bad-Loan Recovery

State Bank of India has started digitising its stressed-asset tracking systems to improve recovery and oversight, a senior bank official said. The project, internally called the Stressed Asset Lifecycle Management System, targets the last major business vertical at the country's largest lender that remains largely manual.

The system has been under development for six months and is expected to go live by January 2027. Once operational, it will consolidate details of legacy stressed accounts into a single dashboard, enabling real-time tracking and faster decision-making on bad-loan recovery, the official said.

“This will allow SBI executives to check at what stage each stressed asset is and what kind of recovery efforts are ongoing. This is not possible right now,” the official told Mint on condition of anonymity.

The platform will bring together information on legacy non-performing assets, including account status, legal proceedings, recovery actions, and case-level developments. Officials will be able to monitor progress centrally, reducing delays caused by fragmented processes.

The move comes as SBI has sharply improved its asset quality over the past few years but still manages a sizable stock of older stressed accounts. As of March, the bank's gross non-performing assets stood at ₹73,452 crore, down from ₹76,880 crore a year earlier. The gross NPA ratio improved to a two-decade low of 1.49% from 1.82%, while the net NPA ratio stood at 0.39% from 0.47%, reflecting sustained recoveries and tighter underwriting standards.

Sizeable bad-loan chunks as of March 31 include those from sectors such as trading, telecom, roads, and ports. The majority of the ₹73,452-crore bad loans fall under an unclassified category termed 'others' in the bank's FY26 annual report. This category holds ₹52,947 crore in bad loans, accounting for 72% of the pool.

In FY26, SBI wrote off ₹17,803 crore in dud assets, compared with ₹20,309 crore in FY25. It recovered ₹10,054 crore in FY26 from accounts previously written off, versus ₹8,002 crore in FY25. Banks write off loans for prudential reasons and remain free to pursue recovery at any time. When recovered, these loans are recorded as 'recovery from written-off accounts' and form part of other income in the profit and loss statement.

After years of living with a painful pool of stressed loans, the Indian banking sector has cleaned up its act in recent years. RBI data showed the banking system's asset quality improved in FY26, with gross NPAs at a multidecadal low of 1.8%. The improvement was broad-based across bank groups, the RBI said in its Financial Stability Report on June 30.

At SBI, the proposed dashboard is expected to improve accountability by making the status of each stressed account visible, streamlining recovery efforts, and reducing procedural bottlenecks that often delay resolution of long-pending cases.

Nirmal Gangwal, founder of Brescon, a Mumbai-based single-family office and a financial turnaround and restructuring veteran, said digitisation could address one of the biggest challenges associated with legacy bad loans.

“In a legacy NPA, the problem is that nobody wants to take a decision. It's an accountability issue. Because the size is very small, no officer wants to stick his neck out. That leads to procedural delays and multiple layers of approvals. In such a situation, digital is the best way,” he said.

“At least decisions are taken, the process is streamlined, and whatever the outcome is, it's okay because nobody has a vested interest. I feel it's a good move,” Gangwal said.

The move echoes SBI managing director Ashwini Kumar Tewari's July 2022 interview with Mint, in which he spoke about using technology and analytics to improve monitoring of stressed assets as part of the bank's digital push.