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The gravity of the NPA situation in public sector banks (PSBs) can be judged from the condition of the country's largest lender State Bank of India (SBI), which has written-off loans worth Rs 1 lakh crore in past two years.According to the bank, during the past five financial years, SBI's total recoveries were Rs 96,920 crore. Of this, Rs 13,678 crore came from the accounts written-off in the last two fiscals, and Rs 9,181 crore in the preceding three years.Banks write-off bad loans after their recovery become unviable, while they fully provide for these written off loans.SBI wrote-off Rs 61,663 crore in the last fiscal ended March and had written off Rs 40,809 crore in the previous fiscal, taking the aggregate amount written off in two years to Rs 1.02 lakh crore, or nearly double the amount of Rs 57,646 crore that the lender wrote-off in the preceding three financial years.With a big chunk of bad loans written off in 2018-19, SBI's outstanding gross non-performing assets (NPAs) declined 23 per cent year-on-year (YoY) to Rs 1.72 lakh crore.Finance Minister Arun Jaitley has said that PSBs have recovered Rs 36,551 crore of NPAs during April-June quarter of 2018-19 as compared to Rs 74,562 crore recovered in all of 2017-18.The cash recovery targets for PSBs for the last fiscal was ambitiously set at Rs 1.81 lakh crore which could not be met as some big cases like Essar Steel and Bhushan Steel and Power could not be resolved during the last fiscal.Bank of India returned to profit in the fourth quarter ended March and its asset quality, capital and loan growth are in much better position now.Reserve Bank (RBI) Governor Shaktikanta Das has pointed out that the period till September 2018 has seen a decline in gross NPA ratios the first such dip in three years.According to the RBI's half-yearly financial stability report (FSR), banks' gross NPA ratio declined to 10.8 per cent in September 2018 from 11.5 per cent in March 2018, while for the state-run lenders, the same fell to 14.8 per cent in September 2018 from 15.2 per cent in March.Union Bank of India posted Rs 3,369-crore loss, while the RBI found divergence in the PSB's bad loans. Its net loss of Rs 3,369 crore in the March quarter of 2018-19, were because of higher operational expenses and provisions on account of bad loan divergences.UCO Bank's percentage of gross NPAs to total advances during the March quarter stood at 25 per cent, against 24.64 per cent a year ago, while net NPAs fell to 9.72 per cent, from 13.10 per cent the previous year.The canking sector's gross NPAs fell as Insolvency and Bankruptcy Board (IBC) helped in better recovery, says rating agency Crisil.Recovery through the IBC process was at Rs 70,000 crore in fiscal 2018-19, which was around double the Rs 35,500 crore recovered through other resolution mechanisms such as the DebtR ecovery Tribunals, Crisil said.Insolvency and Bankruptcy Board of India (IBBI) Chairman M.S. Sahoo says IBC helped creditors recover 195 per cent of the liquidation value."If you get anything above liquidation value, then it is actually a bonus. This bonus has come because of Insolvency and Bankruptcy Code," he said.According to IBBI data, of the 370-380 companies referred for liquidation till March-end, 80 per cent of these were either Board for Industrial and Financial Reconstruction (BIFR) cases or had nothing left to realise."If 80 per cent of the cases have nothing to offer, you have to do haircuts in the case of such companies," Sahoo said.IBBI says haircuts resulting for creditors could be due to the delay in starting the resolution process."What can be done if you have started the process very late. Today about 3 80 companies have been ordered into liquidation and 80 per cent of them are either in BIFR or defunct companies and there is nothing to recover as the liquidation value is almost zero," Sahoo said."Who will give the value? That's why there have been haircuts," he added.The Supreme Court's recent decision to quash the RBI's February 2018 circular now provides banks greater flexibility in resolving stressed assets.According to Crisil, the IBC has shifted the balance of power to the creditor from the borrower."The recovery rate for the 94 cases resolved through IBC by fiscal 2019 is 43 per cent, compared with 26.5 per cent through earlier mechanisms. What's more, the recovery rate is also twice the liquidation value for these 94 cases, which underscores the value maximisation possible through the IBC process," said Crisil Ratings President Gurpreet Chhatwal.(Anjana Das can be contacted at Anjana.d@.in)

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