Latest news with #HariHaraMishra
Time of India
10-07-2025
- Business
- Time of India
Bad Loans Shrinking, ARCs Need New Business Model: Crisil
Mumbai: Crisil has called for a shift in the business model of private asset reconstruction companies (ARCs), warning that their assets under management (AUM) are likely to shrink further as the stock of bad loans dwindles. Tired of too many ads? go ad free now AUM, measured through outstanding security receipts (SRs), is expected to fall 4–6% to around Rs 1.05 lakh crore in FY26, following a 15% drop last year, which included a one-time Rs 13,000 crore write-off by a large ARC. Even without this, SR issuances dropped 29% to Rs 22,000 crore in FY25 from Rs 31,000 crore in FY24. Redemptions have outpaced acquisitions for two consecutive years, aided by younger asset vintages, faster churn in retail pools, and more cash deals. With gross NPAs in the corporate segment falling below 2%, fresh acquisition opportunities are scarce. Additionally, the govt-backed NARCL has gained a competitive edge in acquiring large corporate loans due to its guarantee-backed SR model. Retail acquisitions, which had slowed due to operational complexity, may see a partial revival. 'Retail acquisitions could see some pick-up this fiscal for two reasons,' said Subha Sri Narayanan, director at Crisil Ratings. 'One, there is an uptick in delinquencies in certain segments, such as microfinance and unsecured loans. Two, the regulations have become more conducive.' She pointed to recent rules that allow ARCs to settle loans under Rs 1 crore without committee approval and formally permit the selling lender to act as servicer. However, she added, 'Such acquisitions may not necessarily be AUM-accretive given the relatively higher discount rates in retail pools.' Tired of too many ads? go ad free now "The short term outlook of ARC industry is linked to issuance of final guidelines on Securitization of Stressed Assets and how market responds to it. I believe originators would have a natural preference for this market based model in respect of small and mid sized loans, instead of going legal with attendant delay in admission and disposal of cases. The volume of stressed assets in market is set to increase and ARCs with nearly two decades resolution experience will have the head start and the preferred choice as Resolution Manager( ReM ) and provide additional business for ARC beyond AUM". Hari Hara Mishra, CEO, Association of ARCs in India. The RBI's draft guidelines issued in Apr 2025 propose a new route for bad loan resolution—securitisation through special purpose entities (SPEs), which can appoint resolution managers (ReMs), including ARCs. 'They can look to build asset-light, fee-based business models by leveraging the existing resolution infrastructure and expertise,' said Aesha Maru, associate director at Crisil Ratings. According to Crisil, such a pivot could help ARCs reduce dependence on acquisition-linked income and sustain operations through resolution fees. Long-term viability, Crisil noted, will depend on agility, innovation, and the ability to demonstrate value in a more competitive landscape.
Time of India
25-05-2025
- Business
- Time of India
ARCs seek bigger role in RBI's new securitisation framework
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel MUMBAI: Asset reconstruction companies (ARCs) have urged the Reserve Bank of India to recognise ARC-sponsored trusts as eligible special purpose entities (SPEs) under the securitisation structure. These trusts are already operationally geared to manage stressed asset pools, they RBI 's draft allows pooling and securitising stressed retail and corporate loans, barring categories like farm loans education loans , fraud, and wilful defaults. Investors must not be related to borrowers or disqualified under IBC have also requested permission to act as investors or co-investors in these securitised asset pools, alongside other eligible investor classes. They have proposed a minimum ARC investment threshold of 2.5% of the total notes issued, to ensure skin in the the operational front, ARCs have asked the RBI to clarify which entity will be responsible for fulfilling regulatory obligations such as updating credit bureau (CIBIL) records, completing KYC compliance, and issuing "no due" certificates to avoid regulatory currently have three primary options for resolving stressed assets: in-house settlement or restructuring, legal routes such as DRT or IBC, and sale to asset reconstruction companies (ARCs). The RBI's proposed framework introduces a fourth option, which is securitisation of stressed assets, offering a market-based alternative for quicker resolution."Given the prolonged delays and uncertainties in legal proceedings, banks may increasingly prefer this route for faster exit and immediate recovery, especially as delays under legal processes lead to higher provisioning burdens year after year," said Hari Hara Mishra CEO ARC Association. "Resolving smaller loan exposures from courts to market mechanisms like securitization could also help decongest the overburdened legal system."The total debt acquired by ARCs have cumulatively reached Rs 16.14 lakh crore in FY25, which is driven by the one-time transfer of Rs 4.23 lakh crore from the stressed asset stabilisation fund to a single ARC. Excluding this extraordinary item, the incremental acquisition stood at Rs 1.71 lakh crore, nearly flat compared to Rs 1.73 lakh crore recorded in FY24.
&w=3840&q=100)
Business Standard
21-05-2025
- Business
- Business Standard
ARCs earning from SR redemption up 15.8% in FY25 on better recovery
The earnings of Asset Reconstruction Companies (ARCs) from redemption of securities receipts (SRs) grew by 15.8 per cent year-on-year (Y-o-Y) to ₹43,256 crore in the financial year 2024-25 (FY25). The redemption of SRs, broadly representing recovery, improved substantially as the economy picked up and amount locked up in stressed sectors like power, infrastructure got resolved, according to the Association of ARCs in India. ARCs had redeemed SRs worth ₹37,364 crore in FY24 and ₹27,356 crore in FY23. SRs are financial instruments issued to qualified buyers as consideration for purchasing distressed assets from banks or financial institutions. While the redemption of receipts increased in FY25, the SRs issued for bad loans acquired by ARCs declined during the period. They issued SRs amounting ₹37,511 crore in FY25, down from ₹37,864 crore in FY24 and ₹41,406 crore in FY23. With stable gross non-performing assets (NPAs) of the banking system below 3 per cent, fresh ARC business remained almost stagnant. The pace of issuance of security receipts issued for acquisition of NPAs remained muted. The redemption outpaced acquisition due to improved recovery and collections. For the next year too, the situation is likely to continue, said Hari Hara Mishra, CEO, Association of ARCs in India in a statement. Also, with the redemption of SRs being higher than fresh SRs issued, the outstanding SRs declined to ₹1.34 trillion in FY25 from ₹1.39 trillion in FY24. The asset sale & settlement contributed only 1/3rd of recovery, the remaining 2/3rd came through Insolvency and Bankruptcy Code (IBC), and in-house restructuring and other measures, the association said. The total dues acquired by ARCs cumulatively rose to ₹16.14 trillion, including those from Stressed Asset Stabilisation Fund amounting to ₹4.22 trillion transferred to an ARC during FY25, it added. The total dues acquired were ₹10.2 trillion at the end of FY24 and ₹8.48 trillion in FY23.
Reuters
15-04-2025
- Business
- Reuters
India moves to deepen junk debt market by allowing bad loan securitisation
MUMBAI, April 15 (Reuters) - The Indian central bank's plan to allow lenders to bundle bad loans into tradable securities will draw foreign portfolio investors (FPIs) and private credit funds, helping deepen the country's junk debt market, analysts and investors said. The Reserve Bank of India (RBI) said last week it would now permit market-determined securitisation of stressed assets, besides those loans where repayments were on track. The volume of securitised standard loans jumped 25% to 2.3 trillion rupees ($26.74 billion) in 2024-25, data from India Ratings and Research showed. Pooling together stressed retail and personal loans will allow banks to lighten their balance sheet and give investors high-yield investment options. It will also draw new investors, broadening the market and giving it more liquidity and depth, said Hari Hara Mishra, CEO of the Association of ARCs (Asset Reconstruction Companies) in India. The debilitating corporate bad-loan cycle in the previous decade took years to clean up and pushed banks to shift focus to the unsecured retail segment, resulting in higher delinquencies. Overall, the sector's bad loans ratio is expected to rise to 3% by March 2026 from a 12-year low of 2.6% in September. High-yield investors, however, are interested in both stressed corporate loans and similar small-ticket loans, said Nachiket Naik, head of private credit at Axis Asset Management. Personal loans and credit card debt accounted for approximately 52% of fresh bad loans in banks' retail portfolios between April and September last year, RBI data showed. So far, the lack of options has forced banks to sell these loans to ARCs at a 90%-95% haircut. Now, banks not only get the option of securitising these loans but the lure of higher returns from such issues will also attract investors, including FPIs and private credit firms. The expected yield of such a pool of stressed assets will be higher than that of a junk or high-yielding bond and akin to what a distressed fund expects from its investments, said Ajit Velonie, senior director at Crisil Ratings. U.S. and European distressed debt funds are drawn to high-yield opportunities in emerging markets such as India, said Sankar Chakraborti, CEO of Acuite Ratings and Research. However, there are some challenges, including the pricing of such securities. "The price determination of NPA securitization deals is influenced by various granular factors such as asset quality, recovery rate, historical probability of defaults of the underlying asset classes and investor sentiments," noted Manisha Shroff, partner at law firm Khaitan & Co.
