Asset Reconstruction Companies (ARCs) in India acquired ₹16,876 crore in stressed loans in Q1FY26, up 22% YoY. Retail SRs jumped threefold, recoveries strong, but US tariffs raise stress risk.

Asset Reconstruction Companies Report Strong Q1FY26 Acquisition Growth

Key Highlights of Q1 Performance

India’s Asset Reconstruction Companies (ARCs) acquired ₹16,876 crore worth of stressed loans in the April–June 2025 quarter (Q1FY26), marking a 22% year-on-year (YoY) increase from ₹13,852 crore in the same period last year (Q1FY25), according to the Association of ARCs in India.

The acquisitions include non-performing assets (NPAs) and loans overdue by up to 90 days.

Global Trade Risks Cloud Outlook

The ARC Association cautioned that rising US tariffs on Indian goods exports could worsen financial stress across sectors. This risk, coupled with global uncertainty and rising insolvencies in major economies, may spill over to India’s domestic corporate environment.

Security Receipts Issuance and Redemption Trends

Issuance Growth

ARCs issued ₹4,388 crore worth of security receipts (SRs) in Q1FY26, up 19.3% YoY from ₹3,678 crore a year ago.

Redemption Outpaces Issuance

SR redemptions rose 22% YoY to ₹7,725 crore, compared to ₹6,310 crore in Q1FY25. This led to a contraction in outstanding SRs — representing assets under management (AUM) — to ₹1.30 trillion at the end of June 2025 from ₹1.36 trillion a year earlier.

Corporate vs Retail SRs — Shift in Composition

• Corporate SRs: ₹2,675 crore in Q1FY26, down from ₹3,182 crore in Q1FY25.
• Retail SRs: ₹1,713 crore in Q1FY26, a threefold increase from ₹496 crore in Q1FY25.

The rise in retail SRs reflects growing ARC activity in consumer loan resolution, offsetting the dip in corporate SR issuance.

Recovery and Resolution Strategies

Recovery remained robust, with ₹14,046 crore recovered in Q1FY26 against ₹46,621 crore for the whole of FY25.

Breakdown of recovery methods in Q1FY26:

• Restructuring: 40%
• Settlement: 26%
• Asset sales: 34%

Expert Insights

Hari Hara Mishra, CEO of the ARC Association, stated:

“Overall Q1 performance this year was slightly better than Q1FY25. However, negative AUM continues. Pockets of stress are broadening, and the contagion effect from global markets cannot be ruled out.”

He further noted that NPAs are cyclical and expected ARC book building to grow in the coming quarters.

Outlook for FY26

With rising retail recoveries and stronger acquisition volumes, ARCs are poised for growth in FY26. However, geopolitical tensions, global trade restrictions, and currency volatility could impact recovery timelines.