Securitisation volume scales record high of Rs 2L cr in FY19

Crisis at non-bank lenders has led securitisation volumes to touch an all-time high of almost Rs 2 lakh crore in the fiscal year 2018-19, as liquidity starved entities sold portfolios, a report said Wednesday. The volumes of securitisation, where a lender sells a portfolio of future receivables, surged 140 percent to touch the Rs 1.99 lakh crore mark, the report by domestic rating agency Icra said.

The market was buoyant in the second half of the fiscal, driven by the liquidity crisis which forced non-bank finance companies (NBFCs) and housing finance companies (HFCs) to rely heavily on portfolio loan sell-downs to raise funds, it said. Its group head for structured finance ratings Vibhor Mittal said the liquidity crisis in the financial sector "forced NBFCs and HFCs to rely heavily on portfolio loan sell-downs to raise funds" as the on-balance sheet funding avenues were limited especially for the low-rated entities.

The relaxation in the minimum holding period (MHP) criteria for long-tenure loans by the Reserve Bank of India (RBI) also helped, as it increased the supply of assets in the system, he added. Helped by aggressive sell-down by the HFCs, the direct assignment transactions surged to Rs 1.28 lakh crore from the Rs 49,000 crore in the year-ago period, it said.

Sixty-six per cent or Rs 84,000 crore of the direct assignment volumes were undertaken by HFCs, out of which around Rs 38,000 crore happened in the October-December period alone, when the liquidity stress levels were the highest in the financial sector. The pass-through certificate volumes more than doubled to Rs 71,000 crore in FY19 from the Rs 35,000 crore in FY18, it said, adding this jump was despite the average yields on such instruments being higher than usual by 1-1.5 percent in the second half of the fiscal.

The share of mortgages in the overall securitisation grew to 48 percent from the year-ago's 45 percent, while the same for commercial vehicles, construction equipment and car loans dipped to 24 percent from the 37 percent last year. Lease rentals got added as a new category and already possesses 6 percent share of the volumes.

Priority sector loans -- the favourite in the securitisation market -- saw its share dip as non-PSL transactions' share grew to 38 percent, one of the highest in recent times.