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June 14, 2026
The Dispatch

Definition

Recovery (Loans)

Loan recovery is the money a bank gets back from a defaulted or written-off borrower, through settlement, asset sale, legal action or insolvency proceedings.

Recoveries directly boost a bank's profit because the underlying loan was already provided for or written off. Recovery from written-off accounts often flows straight to the bottom line as a write-back of provisions or other income.

Indian lenders pursue recovery through the SARFAESI Act (enforcing security without courts), Debt Recovery Tribunals, the IBC and one-time settlements. Recovery rates and timelines vary widely; the IBC improved outcomes for some large cases but average haircuts on resolved accounts remain significant.

Related terms

  • Write-Off (Loans)A loan write-off is the removal of a bad loan from a bank's balance sheet against provisions already made, even though the bank may still pursue recovery.
  • SARFAESI ActThe SARFAESI Act lets banks and certain NBFCs enforce security and seize a defaulting borrower's pledged assets without going through the courts.
  • Insolvency and Bankruptcy Code (IBC)The Insolvency and Bankruptcy Code, 2016 is India's unified framework for time-bound resolution or liquidation of defaulting companies through the NCLT.
  • Haircut (Resolution)A haircut is the portion of their dues that lenders forgo when a stressed loan is resolved, settled or sold below its full value.

Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.