Private ARCs moving to retail loans as national bad bank nearing reality

With RBI mandated loan restructuring and moratoriums ebbing the tide of bad loans among corporates, ARCs have been banking on retail loans to drive business in the pandemic-hit FY21 and player like Edelweiss ARC expects the industry-wide retail assets under management to hit nearly half of the overall pie. The Rs 1.5-lakh-crore asset reconstruction market comprises over a dozen players led by Edelweiss ARC that controls over 30 per cent of the market, and the soon-to-be operationalised national bad bank, to be funded mostly by public sector banks and guaranteed by the government, will add to the clutter of the market and has private players fearing the government guarantee unrevealing their fields.

The pandemic-hit FY21 has seen tepid overall growth for asset reconstruction companies (ARCs), but retail loan portfolio grew faster adding at least 25 per cent more to the assets under management (AUM). While Reliance ARC snaps up only retail loans, for Phoenix ARC comprises 20 per cent of its Rs 8,500-crore total book/AUM. The retail portfolio of Edelweiss ARC is around 10 per cent now, but it will be “deleveraging the corporate portfolio and focusing on retail going forward, while at the industry level it’s about 20 per cent. But I see this touching almost half of the market over the next two years”, Shah told PTI over the weekend

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