‘H1 securitisation volumes rise 45%’

Securitisation volumes rose 45% year-on-year to Rs 1 trillion in the first half of the current fiscal, India Ratings and Research said on Wednesday. Assets worth Rs 45,000 crore were securitised in April-September, an increase of 10%.

The report said the dynamics of the securitisation market changed in July-September, wherein volume of pass-through certifications surpassed direct assignments. This reduction in direct assignment volumes was on account of the merger of HDFC Bank with Housing Development Finance Corporation.

A pass-through certificate comes with a credit enhancement, a type of security cover or protection provided to investors for absorbing losses on account of non-performance of underlying borrowers. But, direct assignment transactions do not have any provision of credit enhancement.

Vehicle loans and secured business loans comprised 70% of pass-through-certificate transactions in the September quarter. Unsecured personal loans comprised 10% of volumes in the second quarter.

The current collection efficiency of secured assets classes, majorly consisting of vehicle loan and secured business pools, has been range bound in the past six months at around 85% and 90%, respectively. Tractor loan collections improved because of a positive monsoon, the report said.

Home loans continued to perform, with the average current collection efficiency being around 98%.

While delinquencies for unsecured loan pools increased in Q2, they were well anticipated, the agency said.

Secured loans with the timely interest and timely principal structure comprised nearly 61% of pass- through certificate issuances in Q2.

“Generally, Ind-Ra has seen transactions with unsecured loan pools having the timely interest and ultimate principal (TIUP) structure. However, transactions with timely interest and ultimate principal structure were also rated during the quarter,” the release said.

Going ahead, securitisation volumes will be driven by the priority sector lending requirements, investor’s appetite for exposure to a variety of asset classes and high credit growth for banks and non-banks.

A variety of structures including turbo triggers, excess interest spread trap mechanism, counter-party replacement, partial timely repayment will enable investors to tailor transactions on the basis of their risk appetite, the credit rating agency said.