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The sale of stressed loans to asset reconstruction companies (ARCs) shot up in 2022-23, partly reflecting assets sold to the newly operationalised National Assets Reconstruction Company Ltd (NARCL), said the RBI in a report.
The book value of stressed assets acquired by ARCs jumped to ₹2,10,111 crore in FY23 against ₹77,516 crore in FY22, per the RBI’s ‘Report on Trend and Progress of Banking in India 2022-23.’
Correspondingly, security receipts (SRs) issued by ARCs to lenders, Qualified Institutional Buyers (QIBs), FIIs, were higher at ₹41,446 crore in FY23 against ₹25,284 crore in the previous year. SRs completely redeemed also rose to ₹9,727 crore against ₹6,108 crore.
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The amount of SRs completely redeemed, an indicator of recovery through this mode, increased further during the year, said the RBI.
During FY23, 9.7 per cent of the previous year’s stock of scheduled commercial banks’ gross non-performing assets was sold to ARCs as compared with only 3.2 per cent in FY22.
“ARCs acquired debt of more than ₹2 lakh crore during 2022-23, a record volume of acquisitions, registering a growth rate of over 30 per cent,” said Hari Hara Mishra, CEO, Association of ARCs in India.
Multiple channels
Meanwhile, among the multiple channels through which banks resolve their stressed assets, debt recovery tribunals witnessed the highest growth rate (89 per cent) in the number of referred cases (58,073) and also the amount involved, which increased about six times to ₹4,02,636 crore during 2022-23.
After a sharp increase in the previous year, referred cases (declined about 26 per cent to 1,85,397) as well as amount involved (declined about 8 per cent to ₹1,11,805 crore) contracted for cases under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
The Insolvency and Bankruptcy Code (IBC) remained the dominant mode of recovery, with a share of 43.0 per cent (or ₹53,968 crore) in the total amount (₹1,25,587 crore) recovered in 2022-23, and the recovery rate also improved to 40.3 per cent from 23.9 per cent.
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