ARC security receipt recoveries likely to jump 60% on retail boom

The recovery rates in Security Receipts of Asset Reconstruction Companies (ARCs) are expected to improve by 5% – 7% to as high as 60% in the next fiscal due to rising cash transactions, higher retail loans and faster recovery due to better quality assets, said Crisil.

The share of cash transitions in Crisil’s Rs. 30,000 crores model SR portfolio increased to 40% from 36% in FY 22. The trend is expected to continue.

“Another reason for the increased recovery rate is that participation of ARCs in retail segment is likely to more than double to 15-18% next fiscal,” said Sushant Sarode, Director, CRISIL Ratings. “This benefits as recovery for retail pools starts within a few months of acquisition, accelerating the cumulative recovery. In contrast, recovery for corporate assets depends on the resolution strategy and can stretch to 5-8 years.”