The retail securitisation volumes in India are estimated to have reached Rs 1.8-trillion mark during 2022-23, almost near to the pre-pandemic level, as per a report by Acuite Ratings & Research.
Retail securitisation volumes had fell sharply from Rs 2 trillion in FY20 to Rs 90,000 crore in FY21 due to the lack of activity on account of Covid-19 pandemic. During FY22, the volumes stood at Rs 1.3 trillion, Suman Chowdhury, chief analytical officer at Acuite Ratings, said.
An uptick in consumer sentiments, better credit underwriting standards and improvement in collection efficiencies have led to the revival in securitisation volumes, the rating agency said.
Securitisation is the practice of pooling together various types of loan assets and repackaging them into marketable securities. Since many banks have limited access to rural areas, they buy securitised pool of loans directly from non-banking finance companies (NBFCs).
As per the report, securitisation volumes witnessed a sharp jump in H2FY23, and volumes reached Rs 1.2 trillion between April and December. Banks and investors have started to regain confidence in asset classes such as microfinance and unsecured business loans after the disruptions during the pandemic, it said. Direct assignment (DA) transactions continue to account for 60% of the retail transactions, while pass through certificate (PTC) transactions accounted for the rest.
Commercial vehicle loans and loan against property continue to be the key asset classes that find greater acceptance, the rating agency said. However, the Reserve Bank of India’s (RBI) revised guidelines on securitisation in December 2022 could impact the securitisation market for personal, consumer and other short-term loans, the report said.
“The recovery of the retail securitisation market in FY23 confirms the normalisation of business operations for NBFCs and the steady recovery in asset quality for almost all asset classes consequent to the revival in domestic demand,” Chowdhury said.