Hari Hara Mishra, CEO, Association of ARCs in India
Redemption of security receipts (SRs) issued by asset reconstruction companies (ARCs) outpacing SR issuances in FY25 suggests that banks and financial institutions continue to see improvement in asset quality even as loan underwriting standards are getting tightened.
The amount of SRs issued by ARCs was marginally lower at about ₹37,511 crore in FY25 against ₹37,864 crore in FY24, according to the Association of ARCs in India data.
However, redemption of SRs improved about 16 per cent year-on-year to ₹43,256 crore in FY25 (₹37,364 crore in FY24) in an indication that the recovery environment for the financial intermediaries is improving.
Sale of stressed assets to ARCs is one of the channels for their resolution for lenders. This is done either through a combination of cash payment and issue of SRs or all cash transaction.
Buoyed by falling slippages, higher writeoffs and steady credit demand, the gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs) fell to a multi-year low of 2.6 per cent in December 2024 from 3.0 per cent in December 2023, per latest monetary policy report.
Hari Hara Mishra, CEO, Association of ARCs in India, observed that the pace of security receipts issued for acquisition of NPAs (non-performing assets) remained muted, as banks continued to have robust credit quality and low pressure to sell NPAs
Redemption of SRs reflect substantial improvement in recovery as the economy picked up and the amount locked up in stressed sectors like power, infrastructure etc. got resolved, he added.
“Banks’ NPAs are at a comfortable level. The pressure on banks to seek an exit through ARC route is muted. For the current financial year, the X factor is securitisation of stressed assets, which is in pipeline. This poses both a threat and an opportunity for ARCs to have a pie of this emerging market structure,” Mishra said.
As SR redemptions were higher than fresh SRs issued, the outstanding SRs declined ₹5,745 crore during FY25 and stood at ₹1,34,178 crore against ₹1,39,923 crore in FY24
An analysis by the Association shows that asset sale & settlement contributed only 1/3rd of recovery (₹16,699 crore) in FY25, with the remaining 2/3rd (₹29,922 crore) coming via IBC Insolvency and Bankruptcy Code), in-house restructuring and other measures.
Dues acquired by ARCs in FY25 spiked ₹5,93,963 crore (₹1,72,577 crore in FY24) due to acquisition of assets from the Stressed Asset Stabilisation Fund of ₹4,22,916 crore in March 2025. Excluding this one time extra ordinary item, dues acquired in 2025 increased by ₹1,71,047 crore.
Published on May 21, 2025