NARCL Eyes Smaller Stressed Assets Beyond Government-Backed Framework

National Asset Reconstruction Co. Ltd. (NARCL), the state-backed bad bank set up to tackle stressed assets, is preparing to widen its acquisition strategy beyond the sovereign guarantee-backed framework that has defined its operations since inception. The move comes at a time when recoveries in the asset reconstruction industry are improving and the stock of large legacy bad loans continues to decline.

The government-backed entity, established in 2021, has so far focused on acquiring non-performing assets under a structure supported by a sovereign guarantee of up to ₹30,600 crore on security receipts (SRs). Of this amount, nearly ₹22,000 crore has already been utilised, according to people familiar with the development.

Why Is NARCL Expanding Its Strategy?

Sources said NARCL plans to continue operating as an asset reconstruction company (ARC) while also pursuing acquisitions outside the government guarantee framework.

This is in response to changes in the stressed assets market environment. There have been improvements in the levels of recovery rates in various industries, thereby allowing the ARCs to diversify their transaction portfolio.

As stated by Crisil Ratings, the total recovery rate on the security receipts would increase by about 700 basis points this fiscal year, bringing the total recovery level close to 90%. These gains would largely be due to the resolution in the sectors such as real estate, roads, and power.

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Looking Beyond Large Stressed Assets

Encouraged by strong recoveries in five accounts, NARCL is now evaluating opportunities outside the guarantee-backed structure, including smaller stressed accounts with debt exposure below ₹500 crore.

As of 31 March 2026, NARCL had acquired 33 borrower entities with total debt exposure of ₹1.66 lakh crore. The company has also participated in insolvency proceedings under the Insolvency and Bankruptcy Code and is working towards its acquisition target of ₹2 lakh crore.

People familiar with the matter said NARCL's next phase could include more flexible deal structures, including cash-led bids that are becoming increasingly common in the ARC industry.

Source:

The Economic Times