The Reserve Bank of India (RBI) has developed a framework for the recovery of bad loans, which primarily includes the following measures: Prudential Framework for Resolution of Stressed Assets (2019): This framework provides guidelines for the resolution of stressed assets in the banking sector. It mandates that banks classify and resolve stressed accounts within a specified period. For large accounts (over ₹2,000 crores), it requires resolution within 180 days from the date of default. If the resolution is not achieved within this time frame, the account must be referred to the Insolvency and Bankruptcy Code (IBC) for further action. Insolvency and Bankruptcy Code (IBC), 2016: The IBC provides a legal process for the resolution of corporate insolvencies, which is applicable to companies and limited liability partnerships. It enables creditors to initiate proceedings against defaulting borrowers and aims for the timely and efficient recovery of loans. The RBI has mandated the use of IBC for resolution when other methods fail to achieve recovery. Asset Reconstruction Companies (ARCs): The RBI permits banks to sell their bad loans to Asset Reconstruction Companies, which specialize in recovering stressed assets. ARCs buy bad loans at a discounted price and then work to recover the dues. Restructuring Programs: The RBI has introduced restructuring schemes for specific sectors (such as MSMEs) and for borrowers facing temporary liquidity issues. One such initiative is the Resolution Framework for COVID-19-related Stress, which allows restructuring for loans affected by the pandemic. Other schemes, like the Prudential Framework for Resolution of Stressed Assets, provide guidelines for rescheduling payments. Recovery through Direct Negotiations: Banks are encouraged to directly negotiate with defaulting borrowers for repayment or settlement before resorting to legal actions. This can include restructuring the loan, waiving penalties, or offering a one-time settlement. These frameworks aim to balance the interests of lenders, borrowers, and other stakeholders while ensuring the stability of the financial system.