Securitisation transactions witness improvement in collection efficiency in August

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October 20, 2021 7:18 PM

Securitisation involves transactions where credit risks in assets are redistributed by repackaging them into tradable securities with different risk profiles.

India Ratings and ResearchThe agency said there is an improvement in the current collections across asset classes, except in unsecured business loans and tractor loans

India Ratings and Research (Ind-Ra) on Wednesday said its rated securitisation transactions have seen a continuous improvement in their average current collection efficiency to 80 per cent in August 2021 from 79 per cent in July 2021. There has been a 10 percentage point increase in the collection efficiency since May 2021 for all the outstanding transactions, after reducing by 13.4 percentage points from March-May 2021, it said.

The agency, in a report released on Wednesday, said it has witnessed a ‘continuous recovery in the average current collection efficiency to 80 per cent in August 2021 from 79 per cent in July 2021 across its 143 rated securitisation transactions’. There is likely to have been a further improvement in September 2021 collections, it added.

Securitisation involves transactions where credit risks in assets are redistributed by repackaging them into tradable securities with different risk profiles. It may give investors of various classes an access to exposures which they otherwise might be unable to access directly.

The agency said there is an improvement in the current collections across asset classes, except in unsecured business loans and tractor loans.

In unsecured business loans, the overall collections including overdues were significant and were thus sufficient to cover pass through certificate investor obligations and replenish credit enhancement (CE). With the festive season upon us, the agency expects demand to pick-up, not only for the non-discretionary sector, but also for discretionary products. “This will allow small businesses to perform better,” it said.

The rating agency said with the rural area impacted substantially from the second Covid-19 wave, there is still a downward pressure on collections for its rated tractor loan transactions. Prospects for the agricultural sector and rural demand looks promising, which could help borrowers in the near term, it said.

However, the recovery process could defer, considering few states are still under lockdown restrictions and recent floods in Kerala could impose further challenges, it said. The agency said it witnessed a drop in delinquency percentages for its rated transactions across asset classes.

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