Retail stress continues to build up on banks’ books, with lenders putting up about Rs 15,000 crore of fresh non-performing assets (NPAs) for sale to asset reconstruction companies (ARCs) in the quarter ended June.
The bulk of the fresh NPAs came from the retail segment, while about one-fifth comprised loans to smaller corporate accounts, such as micro, small, and medium enterprises.
Including these new additions, the total stock of bad loans currently available for acquisition by ARCs stood at Rs 50,000 crore.
“During Q1 FY27, the new-to-market NPAs are estimated to be about Rs 15,000 crore. Lenders opt for the ARC route for clean exit, which helps improve their bottom line in case of fully provided large accounts and to save operational costs of carry & compliance in respect of small loans.
Around Rs 50,000 crore of NPAs have been showcased for sale to ARCs. Most of the earlier period loans carried forward are corporate loans,” said Hari Hara Mishra, chief executive office, Association of ARCs.
Comparable data showing fresh bad loans put up for sale by banks to ARCs is unavailable. Mishra said the ARC Association had, for the first time, compiled quarterly data for fresh bad loans available for sale to stressed ARCs. Earlier, it only tracked completed sales and security receipts (SRs) issued.
As of June 30, 2025, the outstanding dues acquired by ARCs stood at Rs 16.3 lakh crore, up by Rs 16,876 crore over the previous year. This includes both corporate and retail loans. The ARC Association is compiling this data for June 2026.
As of March 2026, total dues acquired by ARCs stood at Rs 18.2 lakh crore, an increase of Rs 2.05 lakh crore from the year-ago period. Of this, corporate loans were at Rs 15.73 lakh crore, up Rs 1.5 lakh crore, while retail loans stood at Rs 2.47 lakh crore, up Rs 54,727 crore.
Security receipts issued by ARCs stood at Rs 3.51 lakh crore as of March 2026, up by Rs 29,202 crore from the year-ago period. Of this, the corporate loan segment stood at Rs 2.92 lakh crore, up by Rs 18,974 crore, while retail loans were at Rs 58,826 crore, an increase of Rs 10,228 crore.
Security receipts are certificates issued by the ARCs to banks in lieu of future payments, after applying necessary haircuts and discounts on the original bad debt.
Banks typically put up a pool of bad assets for sale to clean up their books and prevent bad loans from weighing on their profitability.
“Private banks also sold retail NPAs during the quarter, most of them from the unsecured book,” said the head of a leading ARC.
One of the first deals that closed during the quarter was Bandhan Bank’s sale of mortgage and small-ticket corporate loans. The bank put up 3,000 accounts with outstanding loan value of Rs 303.74 crore, which was acquired by a large ARC. Bandhan Bank has been slowly offloading its bad loans for the past few quarters in a bid to clean up its books.
In another transaction, a large ARC bought Rs 600 crore worth of retail stressed assets during the quarter from a pool of 14,000 accounts, including unsecured credit card dues and unsecured loans.
Meanwhile, the National Asset Reconstruction Company Ltd (NARCL) is bidding for acquiring stressed assets in the ₹100-500 crore range without government guarantees.
“We had to take up this model as there were no accounts above Rs 500 crore. We now have a pipeline of Rs 35,000 crore,” said an NARCL official.
Large legacy accounts such as Videocon Industries, Aban Offshore and Reliance Communications have been up for grabs for the past several quarters.
Banks are expected to report lower gross NPAs in the first quarter of FY27 as write-offs and sales to ARCs continue to be key tools for cleaning up balance sheets and improving profitability.