Book value of assets acquired by ARCs crosses ₹10 lakh crore mark

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The book value of assets acquired by 27 Asset Reconstruction Companies (ARCs) from lenders crossed the ₹10 lakh crore mark for the first time to stand at ₹10,25,429 as on March-end 2024, according to a RBI report.

The book value of assets acquired by 28 ARCs stood at ₹8,39,126 crore as on March-end 2023, per RBI’s Report on Trend and Progress of Banking in India 2023-24

The security receipts (SRs) issued by ARCs stood at ₹2,83,330 crore as on March-end 2024 against ₹2,46,290 crore as on March-end 2023.

The acquisition cost of ARCs as a proportion of their book values of assets declined for the second consecutive year in 2023-24 to 27.63 per cent (from 29.35 per cent in 2022-23), suggesting lower realisable value of the assets.

The SRs completely redeemed, an indicator of recovery through this mode, improved to 37.5 per cent of previous years’ outstanding SRs during 2023-24 from 32.8 per cent during the previous year.

During 2023-24, the ratio of asset sales to GNPAs (gross non-performing assets) declined to 5.8 per cent from 9.7 per cent in the previous year.

Amongst bank groups, the aforementioned ratio increased for public sector banks (PSBs) and foreign banks (FBs) due to higher sale to ARCs as well as moderation in GNPAs. In the case of private sector banks (PVBs), the decline in sales to ARCs outpaced the reduction in GNPAs, pulling the ratio down, RBI said.

The central bank noted that Banks and FIs (financial institutions) subscribed to 59.1 per cent of the total security receipts (SRs) issued at end-March 2024 as compared with 60.6 per cent a year ago and 62.5 per cent at end-March 2022, indicative of increasing diversification of investor base.

“While GNPA has declined by ₹91,000 crore during 2023-24, the write off during the year is ₹1.69 lakh crore, and a part there of represents technical write-off and will be available for sale to ARCs. Hence, ARCs still have potential to acquire and resolve assets available in the market,“ said Hari Hara Mishra, CEO, Association of ARCs in India.