Retail and MSME asset buying to drive ARC business in FY24: India Ratings

Expected credit loss model for banks; PCA for NBFCs levers to asset sale

The acquisition of stressed loans in the retail and MSMEs segments will drive the business of asset reconstruction companies (ARCs) in FY24 in the backdrop of planned implementation of Expected Credit Loss (ECL) framework.

The application of the Prompt Corrective Action (PCA) framework for non-banking finance companies (NBFCs) may also lead to a rise in asset sale, according to India Ratings (Ind-Ra).

Because of the expected muted stress addition in large-ticket corporate assets, the ARC sector's AUM growth would be heavily reliant on small-ticket retail and MSME non-performing assets (NPAs).

Ind-Ra has assigned a stable rating outlook to asset reconstruction companies (ARCs) for