Private ARCs Face AUM Decline: Crisil Report

Mumbai, Jul 10 (PTI) Domestic ratings agency Crisil on Thursday said private asset reconstruction companies' assets under management (AUM), measured in terms of security receipts, are set to decline by up to 6 per cent in FY26 to Rs 1.05 lakh crore as redemptions are outpacing acquisitions.

This is on top of a 15 per cent decline in the AUM in FY25, the agency said in a report, pitching for a slew of changes that such entities need to adopt going forward.

"Business model realignment is imperative in a dynamic regulatory landscape," it said.

Competition from government-supported National Asset Reconstruction Company Limited (NARCL), which works on a guarantee-backed model, dents the competitiveness of private ARCs, it said, adding that proposed regulatory changes under which securitisation of retail non-performing assets will be allowed, make it more challenging.

"With the securitisation of NPAs potentially disrupting the industry's status quo, ARCs may have to seek alternative opportunities to drive growth and profitability. With the Reserve Bank of India's (RBI) draft guidelines of April 2025 providing a framework for this new product, ARCs must prepare to pivot and adapt to a rapidly changing landscape," the agency said.

The agency's suggestions come amid reports of several private ARCs either winding down or shutting operations in the country.


Acquisitions by private ARCs will remain subdued in FY26, it said, adding that SRs (security receipts) issued last fiscal had already reduced 29 per cent to Rs 22,000 crore from Rs 31,000 crore in FY24.

The decline in corporate NPAs led to slower addition of available opportunities, but there exists a large stock of NPAs on bank books, it said, adding that this is where the competition by the state-run NARCL hurts private ARCs.

Crisil director Subha Sri Narayanan said despite the regulatory headwinds, retail acquisitions could see some pick-up in FY26 on an uptick in delinquencies in certain segments, such as microfinance and unsecured loans, and also conducive regulations like clarity on appointing the selling entity as a servicer.

But such acquisitions may not necessarily be AUM-accretive given the relatively higher discount rates in retail pools, especially for unsecured loans, it said, adding that private ARCs will continue to tap both corporate and retail assets based on opportunity and value.

On the regulatory changes, especially the one proposed through a draft in April this year that seeks to allow retail asset securitisation, its associate director Aesha Maru said the new products could increase competition for ARCs.

"They can look to build asset-light, fee-based business models by leveraging the existing resolution infrastructure and expertise in stressed assets resolution and become ReMs (resolution managers) under the new framework," Maru said.

What will drive long-term sustainability for private ARCs is the demonstration of value they bring by being agile and embracing innovation, even as they continue to focus on enhancing both the extent and pace of resolutions, the agency said.