The National Asset Reconstruction Company Ltd, (NARCL), which is slated to become the mother of all Asset Reconstruction Companies (ARCs), will prompt existing ARCs to change their business orientation and start focussing on buying the stressed retail and MSME assets, according to Pallav Mohapatra, MD & CEO, Asset Reconstruction Company (India) Ltd (Arcil). He emphasised that ARCs have a huge business opportunity to buy stressed assets aggregating about ₹1 Lakh Crore in the retail and micro, small and medium enterprise (MSME) segments. Stressed assets with principal outstanding of ₹500 Crore and above, aggregating about ₹2 Lakh Crore, are expected to be transferred by lenders to NARCL.

The distressed asset market, which had gone into a deep freeze after the outbreak of Covid-19, has started to recover in Q3. Large banks have lined up a string of legacy non-performing assets (NPAs) for sale to asset reconstruction companies (ARCs). The deterioration of household incomes has also led banks to consider the ARC route for retail assets and the activity in this segment is now 30-40% higher than pre-pandemic levels. In fact, latency is one of the key factors driving the series of deals right now. Aswini Sahoo, executive vice-president and chief investment officer at Asset Reconstruction Company (India) (Arcil), said, “There are deals that should have happened in the early part of this year which have now got bundled together in the last few months. We will see some more large names in the power sector, which could get closed in the next quarter.”