Securitisation is a common method used by non-bank lenders to free up capital and generate immediate liquidity by selling loan portfolios to those looking to build their loan books.
The number of originators that undertook securitisation has also improved to 50 in Q3 FY2021 as against 45 and 18 in Q2 and Q1 FY21, respectively. (Representative image)
Rating agency Icra expects the uptick in securitisation volumes to continue in the coming quarters. It witnessed 61% sequential growth during the December quarter (Q3FY21). Ever since the sharp fall in domestic volumes in Q1FY21, the securitisation market has been on a path of revival on a sequential basis, the credit rating agency said. The number of originators that undertook securitisation has also improved to 50 in Q3 FY2021 as against 45 and 18 in Q2 and Q1 FY21, respectively.
Securitisation is a common method used by non-bank lenders to free up capital and generate immediate liquidity by selling loan portfolios to those looking to build their loan books. Abhishek Dafria, vice-president and head – structured finance ratings at Icra, said the increase in securitisation volumes in the past two quarters could be regarded as a sign of the path to normalcy for non-banking financial companies (NBFCs) and housing finance companies (HFCs) at least as far as disbursements are concerned. “We maintain our annual securitisation volume estimate at 0.8-0.9 lakh crore for FY2021 with the quarterly growth momentum expected to continue in the next fiscal,” he added. The total securitisation volumes for nine months during FY21 remained at Rs 47,100 crore, which include Rs 24,400 crore in Q3FY21.
Securitisation volumes have largely been dominated by the secured asset class this financial year. The proportion of mortgage-backed securities (MBS) in the total securitisation volumes improved to 42% for Q3 FY2021, compared to 33% in the first half (H1) of FY2021. MBS has seen the least disruption in collections due to the pandemic and, consequently, relatively lower spike in delinquencies.
Icra assistant vice-president Sachin Joglekar said the uncertainty caused by the pandemic has seen investors increase their focus to the secured asset class, where the losses would be restricted due to the presence of adequate collaterals. “On the other hand, unsecured loans like microfinance loans continue to remain limited in the securitisation market, forming about 5-6% in Q3 FY2021 as against 15%-20% seen in FY2020,” he said.
While the delinquency levels have seen an increase across asset classes, as expected after the end of the moratorium, Icra has observed that the credit enhancement available in its rated transactions have been adequate so far to take care of any shortfall in collections, which would also give confidence to investors.