Securitisation volumes jump 48% in H1FY22, says Crisil

Securitisation volumes have jumped 48 per cent to over Rs 75,000 crore for the first half of the fiscal, a domestic rating agency said on Tuesday. In a report, Crisil Ratings attributed the jump to continued faith of investors in retail loans amid the macroeconomic headwinds.

It can be noted that securitisation activity, wherein a lender transfers its future receivables on a loan to other financier against a cut, had suffered a lot during FY22 because of the devastating second wave of the coronavirus pandemic which made loan recollections difficult.

Speaking about the growth in first half of FY23, the agency’s deputy chief ratings officer Krishnan Sitaraman said the long track record of stable performance of securitised pools, despite several episodes of adversity, may have eased investor concerns, but added that some investors continue to be apprehensive.

“…the reticence of some investors to take fresh exposure led to some deals remaining unexecuted, shaving off nearly 10 per cent from the segment’s potential growth,” Sitaraman said.

Mortgage-backed securitisation loans remain the largest segment among asset classes, accounting for 40 per cent of market volume, followed by commercial vehicle loans at 30 per cent and microfinance loans at 13 per cent.

Direct Assignment (DA) transactions, including mortgage, gold and microfinance loans, accounted for 62 per cent of the volume, it said, adding that the share of Pass-Through Certificates (PTCs) declined to 38 per cent from 44 per cent a year ago.

Private sector banks bought over half of the loan assets, while the state-run banks did a fourth of the volume, it said.

In a first, a PTC transaction comprised loans originated by NBFCs under a co-lending framework with another larger NBFC and securitised by the latter, it said.

The agency said securitisation activity has witnessed some “unconventional practices” in the past few months like non-mortgage transactions offering flexible rates on their liability instruments, to accommodate investor expectations.

Nearly a fifth – an unprecedented high – of the PTC transactions in the past three months had a turbo-acceleration proviso, which limits or prohibits outflow from the pool to the originating entity until the investor is fully paid, it said.

Banks and NBFCs alike have reached arrangements under new lending formats such as co-lending, but its impact on securitisation will likely not be material in the near term till the players get accustomed to these new formats, the agency said.

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