Asset reconstruction companies (ARCs) acquired bad loans worth Rs 26,304 crore from the banks in first quarter of FY27, compared to Rs 16,876 crore during the same time last year.
The over 50% y-o-y rise in purchases of non-performing loans, in the normally lean June quarter, indicates a positive signal that more transactions are taking place in the stressed assets space as resolutions are accelerating.
The purchase order during the June 2026 quarter included Rs 17,942 crore of corporate loans and Rs 8,362 crore of retail loans. In the year-ago quarter, ARCs had bought Rs 10,250 crore of corporate loans and Rs 6,626 crore of retail assets.
“Despite headline NPA ratio of the banking system coming down from 2.8% in FY24 to 1.8% in FY26, acquisition of NPAs by ARCs continues to grow. This is because sale to ARCs not only comes from headline NPAs, but also from technical and prudential written off account, not appearing in balance sheet of banks, which are almost double the amount of NPAs,” said Hari Hara Mishra, CEO, Association of ARCs in India.
In the June quarter of FY25, ARCs had bought Rs 13,852 crore of stressed assets, data from the Association of ARCs showed.
According to a source, Asset Reconstruction Company (India) {ARCIL}, was one of the most active players in the market, having acquired around Rs 3,000 crore of bad loans during the June quarter. Among the private banks, RBL was seen to have sold a pool of unsecured loans during the quarter.
“Public sector banks have been mainly putting up corporate and MSME loans for sale while the private sector lenders have been displaying retail stressed assets, particularly in the unsecured book of personal loans,” said the head of an ARC who did not want to be identified.
With the current series of purchases, the total dues acquired by ARCs stands at Rs 1.87 lakh crore as of 30 June 2026, up from `1.85 lakh crore in the preceding three months.
During the quarter, ARCs issued Rs 5,348 of security receipts (SRs), up from Rs 4,389 a year ago. Out of this, Rs 3,648 crore came from corporate accounts and Rs 1,701 crore was retail assets. In the year-ago period, corporate SRs stood lower at Rs 2,685 crore while retail SRs were marginally higher at Rs 1,703 crore. SRs represent the price paid by ARCs to acquire the assets.
The SR issues outstanding stood at Rs 3.61 lakh crore in the June quarter compared to Rs 3.56 lakh crore three months earlier. Out of this, corporate SRs issued stood at Rs 2.97 lakh crore (from Rs 2.94 lakh crore) while retail was at Rs 63,966 crore (from Rs 62,265 crore).
Data showed that redemptions, or payback to the investors holding SRs, increased to Rs 11,519 crore from Rs 7,723 crore in Q1FY26 and Rs 6,310 crore in Q1FY25. The outstanding SR redemptions were at Rs 2.31 lakh crore, down from Rs 2.19 lakh crore three months earlier.
“The accelerated redemptions is a healthy sign for ARC resolution framework, which should inspire confidence among stakeholders to opt more for NPA sales for faster realisations,” said Mishra.
The SR outstanding, which is taken as AUM of ARCs, declined to Rs 1.30 lakh crore from Rs 1.37 lakh crore three months ago. This trend is also visible in earlier years, as redemptions have improved.
“The sharp uptick in sale of retail stressed loans in earlier years seems to be stabilising going by recent Q1 numbers. Normally in the first quarter, the transactions are muted, and a lot of activity will follow in subsequent quarters, particularly in the last quarter of the financial year,” Mishra added