Assets of ARCs May Decline by up to 6% in FY26, Forecasts Crisil

Mumbai, July 10, 2025: Crisil has forecasted a further decline of up to 6% in private Asset Reconstruction Companies’ (ARCs) assets under management (AUM) to ₹1.05 lakh crore in FY26, following a 15% contraction in FY25. Several private ARCs are reportedly considering shutting down or downsizing amid the slump.

The anticipated dip is attributed to a combination of weakening corporate NPA pipelines, subdued acquisition activity, and the growing dominance of state-backed NARCL with sovereign backing. The erosion in competitiveness is compounded by upcoming regulatory changes, including RBI’s draft norms on retail NPA securitisation, pressuring ARCs to pivot away from traditional asset-heavy approaches.

Declining Momentum in Private ARC Acquisitions

The report highlights that the issuance of security receipts (SRs) by private ARCs plummeted by 29% in FY25, sliding to Rs 22,000 crore from Rs 31,000 crore in FY24. With acquisitions likely to remain subdued in FY26, the industry is staring at sustained weakness.

Crisil attributes this trend to a decline in corporate NPAs, limiting fresh acquisition opportunities, even though substantial bad loans remain on bank balance sheets. The growing dominance of the government-backed National Asset Reconstruction Company Limited (NARCL), operating with sovereign guarantees, is also said to be undermining private players’ competitiveness.

New Regulatory Headwinds Ahead

Adding to the pressure, Crisil pointed to proposed RBI draft guidelines issued in April 2025 that allow securitisation of retail NPAs, a move expected to further disrupt the industry.

“With the securitisation of NPAs potentially disrupting the industry’s status quo, ARCs may have to seek alternative opportunities to drive growth and profitability,” the report noted. Crisil emphasized the need for private ARCs to pivot swiftly in response to these regulatory changes.

Strategic Shift Urged: Embrace Asset-Light Models

Crisil has suggested a strategic shift for ARCs, advising them to develop asset-light, fee-based models, leveraging their resolution expertise and infrastructure. These companies can transition into Resolution Managers (ReMs) under the new regulatory framework, enhancing flexibility and scalability.

Aesha Maru, Associate Director at Crisil, remarked that the incoming retail securitisation products would intensify competition.

“ARCs can explore innovative approaches by becoming ReMs, allowing them to stay relevant while reducing capital intensity.”

Focus on Retail Could Offer Short-Term Opportunities

Despite overall weakness, retail NPA acquisitions could see an uptick in FY26, driven by rising delinquencies in microfinance and unsecured loan segments, along with regulatory support for appointing the selling bank as a servicer.

However, Crisil cautioned that these retail acquisitions may not boost AUM significantly due to higher discount rates, particularly in unsecured loan pools.

Outlook: Innovation and Agility Key to Survival

Subha Sri Narayanan, Director at Crisil, highlighted that long-term sustainability hinges on private ARCs proving their value through agility, innovation, and faster resolutions.

The agency’s report comes at a time when multiple private ARCs are reportedly contemplating closure or scaling down operations, reflecting the growing urgency for business model transformation in a rapidly evolving environment.

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