NARCL to expand beyond government guarantee model

Mumbai: State-backed bad bank, National Asset Reconstruction Co (NARCL), is preparing to expand its acquisition strategy beyond the sovereign guarantee-backed model, growing its presence in the stressed asset market, people familiar with the development told ET.

Established in 2021 to aggregate and resolve large non-performing assets from banks, NARCL has so far focused on acquiring stressed loans under a structure supported by a government guarantee of up to ₹30,600 crore on security receipts (SRs). Of this, nearly ₹22,000 crore has already been utilised.

"Until now, the focus was largely on guaranteed accounts. Going forward, NARCL will continue functioning as an ARC and start looking at acquisitions beyond the sovereign guarantee framework," a person aware of the plans said.


The move comes as the asset reconstruction industry enters a new phase where recoveries have improved, and pool of legacy stressed assets has shrunk. According to Crisil Ratings, cumulative recovery rates on security receipts are expected to rise by about 700 basis points in the current fiscal, taking overall recoveries to nearly 90%, driven by resolutions in sectors such as real estate, roads and power.

Given good recoveries in five accounts, NARCL is looking to participate in opportunities that fall outside the sovereign guarantee structure, including smaller accounts of less than ₹500 crore. By end-March 2026, NARCL had acquired 33 borrower entities with an aggregate debt exposure of ₹1,65,862 crore. It has also participated in resolution processes under the Insolvency and Bankruptcy Code and is looking to achieve its ₹2 lakh crore acquisition target.

Under its existing model, NARCL acquires assets through an 85:15 structure, paying 15% in cash and the remaining 85% through security receipts backed by a government guarantee. The guarantee can be invoked to cover any shortfall between recoveries and the face value of SRs, subject to the overall ceiling and validity period.

People familiar with the matter said the next phase of growth could see NARCL offer greater flexibility in deal structures, including cash-led bids that have become increasingly common in the ARC industry.