Sale of bad loans to ARCs to fall this year: Study

India Business Hour
Sale of bad loans to asset reconstruction companies is expected to nose-dive in the current fiscal, as ARCs get cautious about the assets they acquire with the environment getting tougher. A joint study conducted by ASSOCHAM and CRISIL says NPAs worth only Rs 12,000-14,000 crore may be bought by ARCs in FY16 compared to Rs 20,000 crore in the previous fiscal. This, even as gross NPAs of banks are expected to rise by Rs 60,000 crore to over Rs 4 lakh crore. And this, even as almost 40 percent of the restructuring done between 2011 and 2014 slipped into NPAs — so only a fifth of incremental NPAs might be sold this fiscal. The study highlights that capital constraints, valuation mismatches, low recovery rates and longer resolution timeframes have been the primary causes of bad loan sales falling.

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