Challenges mount for ARCs as retail bad loans swell

WIDELY-ACCEPTABLE PRICING MODEL FOR RETAIL NPAs NOT AVAILABLE

- SACHIN KUMAR

ASSET RECONSTRUCTION COMPANIES (ARCs) are facing new challenges with the rise of retail non-performing assets (NPAs). While ARCs have a proven track record in resolving corporate NPAs, they are finding it increasingly challenging to handle retail bad loans.

Absence of a widely-accepted pricing model for retail NPAs, high transaction costs, difficulty in asset valuation and limited ability to directly engage with borrowers at a granular level pose challenges in effective resolution of retail stressed assets. One of the major hurdles ARCs are facing is the absence of a standardised and widely acceptable pricing model for retail NPAs.