Securitisation volume drops 85% in Apr-Jun: Report

"Securitisation volume plunged 85 per cent to Rs 6,200 crore in the first quarter of the current fiscal because of slow collections following the lockdown and the loan moratorium offered by lenders in the aftermath of the COVID-19 pandemic," the report said. According to the rating agency's senior director Krishnan Sitaraman, deferment of transactions is along the expected lines.

Securitisation volume dropped to 85 per cent to Rs 6,200 crore in the first three months of the current fiscal on slow collections and loan moratorium amid the COIVD-19 pandemic, says a report. The decline comes after 15 months of frenetic activity that was majorly driven by non-banking finance companies (NBFCs), rating agency Crisil said in a report.

During the first quarter only marquee players were able to draw some interest, especially from private investors such as insurers and new private banks, it said. "Securitisation volume plunged 85 per cent to Rs 6,200 crore in the first quarter of the current fiscal because of slow collections following the lockdown and the loan moratorium offered by lenders in the aftermath of the COVID-19 pandemic," the report said.

According to the rating agency's senior director Krishnan Sitaraman, deferment of transactions is along the expected lines. "Limited disbursements in the first quarter reduced the immediate liquidity needs of some larger, well-capitalised NBFCs. On the demand side, a vast majority of investors are waiting for clarity on economic activity and borrower cash flows and the consequent impact on collections stability,” he said.

In the April-June period, asset-backed securities (ABS) remained the dominant segment comprising 74 per cent of the overall securitised volume, it said. Mortgage-backed securities (MBS) constituted the balance volume. Direct assignment (DA) route, being the most-preferred for securitisation of MBS deals, accounted for nearly two-thirds of all deals, the report said. It said the partial credit guarantee scheme for direct assignment transactions announced by the government did not draw much traction in the just concluded quarter.

About 34 per cent of the market adopted the pass-through certificate (PTC) route of securitisation, the rating agency said. However, transactions backed by gold-loan receivables bucked the trend, comprising nearly half of the total securitisation transactions in the first quarter. That compares with 20 per cent, 7 per cent, and 2 per cent in the comparable periods of fiscals 2020, 2019 and 2018, respectively, it said.

The number of gold loan originators, too, has risen from two in the first three months of fiscal 2020 to five so far this fiscal, the agency said. "The increase in gold loan-backed securitisation is because of the relatively short tenure of the loans, their strong performance over the past few years, and secured nature of the asset class in a rising gold price environment," the report said.

The agency’s senior director Rohit Inamdar said there is no doubt that securitisation will remain an important tool for NBFCs to mobilise liquidity. "With the phased opening-up of the economy, we expect the current quarter to see more transactions than the first quarter," he said.

Overall pace of recovery in transactions will be a function of improvement in economic activity and collection efficiency trends in the retail segment over the next few months, he added..