Recovery of stressed assets: CaaS it, ARCs tell lenders

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Collection-as-a-Service offers lenders recovery support and ARCs fee-based revenue opportunities.

By K Ram Kumar

Updated - November 04, 2026 at 08:23 PM.

This can also help Banks and NBFCs direct their resources to generating new business rather than being bogged down in a drawn-out recovery process. | Photo Credit: Deepak Verma

Collection-as-a-Service (CaaS) is expected to emerge as a ‘win-win’ for Asset Reconstruction Companies (ARCs) and lenders in tackling stressed loans in the financial system, according to industry experts.

This strategy helps banks with recovery while providing a fee-based service for ARCs. Through CaaS, ARCs get to know firsthand about the recoverability of the assets assigned to them and are even encouraged to make offers to lenders to buy them down the line.

This can also help Banks and NBFCs direct their resources to generating new business rather than being bogged down in a drawn-out recovery process.

Phanindranath Kakarla, Managing Director & Chief Executive Officer, Asset Reconstruction Company (India) Ltd, highlighted scaling of CaaS offerings for banks as one of the company’s strategic priorities.

In a bid to drive growth, efficiency, and new business opportunities, ARCIL, in its investor presentation, indicated that it intends to offer collection services for retail loans to banks and collect outstanding amounts from borrowers on their behalf.

In this regard, the company emphasised that it has a robust collection infrastructure involving a combination of in-house collection managers, legal officers and external collection agencies spread across 24 states in India to ensure efficient recovery from both secured and unsecured pools.

Hari Hara Mishra, CEO, Association of ARCs in India, said, "ARC as a servicer has two clear advantages over any other servicer. First, ARCs are well capitalised vis-à-vis any small servicing agency and operate under strict governance structures, as they are regulated by RBI and are used to strict adherence of extant guidelines on data privacy, fair practice code, etc.

“Second, they have a role as debt acquirer, and understanding the accounts well can later on facilitate an exit opportunity for the seller financial institution and help bridge price expectation mismatch as there will be no information asymmetry.”

Notably, during the 2014-15 period, when stress in corporate loans was on the rise, the Department of Financial Services had advised public sector banks to engage the services of ARCs as agents for recovery of dues in respect of doubtful and loss assets (hard core NPAs), both secured and unsecured. This supplemented the recovery efforts of banks with additional help from specialized entities like ARCs.

An active collaboration with ARCs, the NPA specialists, can add value and supplement the resolution infrastructure of the financial institution. This will help the financial institution focus on its core areas of activity, like lending. For ARCs, which have invested in technology and know-how, this additional income will help improve the return on investment (ROI) made. Currently, there are 27 ARCs in India.

Published on November 4, 2026

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