India's 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. According to reports from The Economic Times, the move comes as the asset reconstruction industry enters a new phase where recoveries have improved, and the pool of legacy stressed assets has shrunk. As reported by people familiar with the matter, NARCL will continue functioning as an ARC and start looking at acquisitions beyond the sovereign guarantee framework. The expansion will include smaller loan portfolios, moving beyond the government-guaranteed deals that have been the primary focus until now.
By end-March 2026, NARCL had acquired 33 borrower entities with an aggregate debt exposure of ₹1,65,862 crore. As reported by The Economic Times, the bad bank has already utilised nearly ₹22,000 crore of the ₹30,600 crore government guarantee on security receipts. The company is targeting to acquire a larger volume of distressed assets, with an ambitious goal of reaching ₹2 lakh crore by March 2026. 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. The company has also participated in resolution processes under the Insolvency and Bankruptcy Code and is looking to achieve its ₹2 lakh crore acquisition target.
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%. As reported by The Economic Times, this improvement is driven by resolutions in sectors such as real estate, roads and power. The enhanced recovery environment is enabling NARCL to consider more flexible acquisition approaches beyond its traditional government-guaranteed framework.
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. According to sources cited by The Economic Times, 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. 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. This shift represents a significant departure from the company's traditional approach of focusing largely on guaranteed accounts.
