The Asset Reconstruction Companies (ARCs) sector is expecting to notch up reasonable growth in Assets Under Management (AUM) and may cross the ₹10 lakh-crore-mark this fiscal, up from ₹8.48 lakh crore a year ago, according to a report.
Also read: Top PMS funds see outflows amid poor showing
According to the report by Crisil Ratings, which was released at an Assocham seminar on ARCs/stressed assets here on Friday, the sector must now look to consolidate as the Non-Performing Assets (NPA) problem has been "well contained".
The book value of bad loan sales to ARCs is likely to cross the ₹10 lakh crore-mark by next month from ₹8.48 lakh crore in March 2023, the report said.
The sector's growth rate is likely to moderate further to five to six per cent next fiscal due to the cyclically low NPAs in banks and NBFCs.
But despite the rapid decline in NPAs, there are opportunities for ARCs as the bad assets in retail books of banks and non-banks spike, the report said.
According to a report by the Reserve Bank of India (RBI), 9.7 per cent of the previous year's stock of gross NPAs were sold to ARCs in FY23 compared to only 3.2 per cent in FY22.
The report also stated that the amount of security receipts completely redeemed, which is an indicator of recovery, has increased during the fiscal, the report said, quoting the Association of ARCs.
Also read: ARCs seek customised credit product from banks
The report further noted that the growing stress in retail loans/small and medium enterprise segments provides opportunity for ARCs to diversify their business from the corporate segment to retail and SMEs.
ARCs came into the picture in 2003 with a handful of players but there are 27 players in the industry now.