Crisil's Call for ARC Business Model Overhaul

In a recent analysis, Crisil has highlighted a pressing need for private asset reconstruction companies (ARCs) to rethink their business strategies. With assets under management (AUM) projected to decrease by 4–6% to approximately Rs 1.05 lakh crore in FY26, following a 15% drop the previous year, the urgency for innovation is clear.

Challenges and Opportunities Ahead

The decline in AUM, measured through outstanding security receipts (SRs), is attributed to a reduction in bad loans and the competitive edge gained by government-backed NARCL. However, retail acquisitions may see a revival, thanks to rising delinquencies in segments like microfinance and unsecured loans, alongside more conducive regulations.

Future Prospects for ARCs

According to Crisil, the RBI's draft guidelines proposing securitisation through special purpose entities (SPEs) could open new avenues for ARCs. Leveraging their resolution expertise, ARCs can explore asset-light, fee-based models to sustain operations in a competitive landscape.