Asset reconstruction companies (ARCs) are entering a critical transition phase as the supply of large corporate bad loans dwindles and retail stress becomes the dominant driver of the distressed-assets pipeline, according to Crisil Ratings. Analysts stated that the assets under management of private ARCs are likely to decline by 4–6% in FY26 and FY27 due to strong redemptions and fewer fresh acquisitions. Overall cumulative recoveries are projected to improve significantly—to 80–85% this financial year and 85–90% in FY27—compared with around 65% in FY25. Analysts attributed the momentum to stable demand across infrastructure sectors such as power, real estate and roads, which are expected to support higher recoveries through the current fiscal.