As NBFC crisis lingers, securitisation volume soars 48% in H1

Shadow banks' continuing difficulties in accessing finance have led to a massive 48 percent jump in securitisation volume in the first half of the fiscal year to Rs 1 lakh crore, finds a report. Decuritisation is a process under which a non-banking financier sells its future receivables from a loan or a pile of loans to a different entity for a discount for cash payout.

Most non-banking finance companies have been struggling for liquidity since the second half of 2018, after a crisis triggered by infra lender IL&FS' defaults. As funds get scarce, a lot of them are selling future receivables. In a report on Monday, rating agency Crisil attributes growth in the first half period to Rs 1 lakh crore to both established and new originators opting for securitisation, pointing out that there were 100 originators in the market as against 70 in the year-ago period.

NBFCs and HFCs do securitisation to augment their resources profile in a challenging environment leading to the massive 48 percent increase in volume, notes the report. Growth was broad-based with both mortgage backed securitisation and asset-backed securitization logging in healthy uptick in volume, it says.

Securitisation of gold loan receivables, personal loan receivables, two-wheeler loan receivables and lease rental receivables are now mainstream, with newer originators increasingly participating in such transactions, it notes. "Heading into the second half, the prospects remain strong. Expansion of the originator base and mainstreaming of nonconventional asset classes augur well for the market," says Rohit Inamdar, a senior director with the agency.

A bigger boost will come from regulatory interventions, says the report, adding the relaxation on guidelines on minimum holding period in securitization transactions backed by long-tenure loans till December 2019 will increase supply of eligible assets available for mortgaged backed securitization transactions. "The partial credit guarantee scheme launched by the finance ministry is expected to further lift demand for securitisation from public sector banks. Many of these banks have already sanctioned loans under the scheme and disbursements are expected over the next few months," says Krishnan Sitaraman, a senior director with the agency.

Securitisation deals backed by microfinance loan receivables should get a fillip over the medium term from the expansion of the definition of microfinance borrower profile. The report also says volume growth is not expected to hamper the market for priority sector lending certificates adding transactions on the same in the first half have hit 83 percent of the full year volume in FY19..