Securitisation refers to an activity where a financier transfers future receivables on a loan or a bunch of loans to others which helps with immediate liquidity requirements.
The rating agency said for around 44% of Crisil-rated corporates, more than three-fourths of their debt comprises short-term working capital facilities.
Securitisation transactions dived 80 per cent in April-September period of the ongoing fiscal year to just over Rs 20,000 crore largely because of the pandemic and the loan moratoriums, domestic rating agency Crisil said. Half of the transactions (over Rs 10,000 crore) happened in September alone, which points to a rebound in transactions as the economic activity increased, it said.
Securitisation refers to an activity where a financier transfers future receivables on a loan or a bunch of loans to others which helps with immediate liquidity requirements. The agency said the overall volume continues to be well below the levels seen in the past few years, when securitisation had become one of the preferred fund-raising tools for non-banking financial companies (NBFCs) after the IL&FS crisis, pointing out that the first half of the last three fiscal years saw volumes of Rs 96,000 crore, Rs 68,000 crore and Rs 37,000 crore.
“Disbursements by non-banks had declined sharply in the first half as business activity hard-braked. That also reduced the need for non-banks to access the securitisation market to churn assets,” its senior director Krishnan Sitaraman said. “Investors also preferred to wait on the sidelines, assessing the impact of moratorium on collection efficiency and credit behaviour, and awaiting clarity on improvement in borrower cash flows and economic activity,” he added. Asset-backed securities comprised 70 per cent of the overall securitised volume in the first half of this fiscal, which marked a 10 per cent growth year-on-year. The direct assignment (DA) route, being the most-preferred mode for mortgage-backed securities, accounted for nearly two-thirds of all deals.
In terms of asset classes, commercial vehicle and gold loans comprised more than half of the transaction volumes in the first half of this fiscal. DA transactions supported by partial credit guarantee of the government saw renewed interest from banks in the past few months, accounting for nearly 12 per cent of volumes, the agency said. With the fall in portfolios under moratorium, the number of active originators increased in the last three months, which resulted in a consequent surge in interest among investors as well wherein the community preferred borrowers who had not availed moratorium at all.
Private banks and insurers remained the main investors, and public sector banks and NBFCs also put money into some securitised pools, it said, adding that mutual funds, a major investor in recent years, have been largely inactive this fiscal. “As more data becomes available on borrower behaviour at portfolio and pool levels, and if they point to predictable, and pre-pandemic-level, collection efficiencies, investor interest will increase,” its director Rohit Inamdar said.