In the year-ago quarter, ARCs had bought non-performing assets with an outstanding value of ₹16,876 crore. Last quarter's figure is almost double the ₹13,852 crore acquired in the first quarter of FY25.
The increase in ARC activity comes even as the overall asset quality of banks has improved significantly. The gross non-performing asset (GNPA) ratio of the banking system fell to 1.8% in FY26 from 2.8% in FY24.
Bad loans sold to ARCs have risen despite a decline in banks' overall bad loan ratio, as a large portion of the loans sold are legacy stressed assets that lenders have been trying to resolve for several years.
The sharp decline in reported bad loans may not fully reflect the actual position, according to a white paper released in February this year by Great Lakes Institute of Management on their website, which said gross NPLs fell to 2.2% of advances in 2025 from 11.2% in 2018 partly due to fewer fresh slippages and because banks wrote off bad loans.
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