The State Bank of India, the country's biggest lender, will name and shame "wilful" defaulters and put their pictures in newspapers to get them to pay up, the Economic Times has reported.
"The fresh approach will ruffle a few feathers," the paper quoted a bank executive as saying.
A "wilful defaulter" is one who does not meet payment obligations even when he or she has the funds.
Bad loans in India could jump to as much as 5.8 percent of the total within two years in a "severe risk" scenario, up from 2.8 percent in September, according to a central bank report.
The non-performing loan ratio for Indian banks was 2.3 percent in the last fiscal year.