Collection ratios of securitised pools improving

Mumbai: Domestic rating agency Crisil Ratings on Monday said the monthly collection ratios of its rated securitised pools has seen improvement due to the gradual easing of Covid-19 related restrictions.

The ratios had declined between April and June 2021 following the second wave of the Covid-19 pandemic, the rating agency said in a report. Securitisation is the process of pooling and repackaging of homogenous illiquid financial assets into marketable securities that can be sold to investors. The trend in improving collection efficiencies has been seen across asset classes and in a number of segments, the levels are quite close to pre-pandemic levels. Collection ratios in mortgage-backed securitisation (MBS) pools have rebounded to near-100 per cent? their pre-pandemic normal ? in the pay-out months of July and August 2021, it said.

The data comes with a month's lag, so July and August payout numbers refer to the collections made for June and July, respectively. MBS pools, with home or property-backed loans as underlying, have shown extremely high resilience across economic cycles. "In asset-backed securitisation (ABS) pools, collection ratios are set to reach January-March 2021 pay-out levels after dipping to 84 per cent in Q1 this fiscal," the agency's Senior Director and Deputy Chief Ratings Officer Krishnan Sitaraman said in the report. Median collection ratios for vehicle loan pools for August pay-out reached 100 per cent, just a tad short of the March collection ratio of 101 per cent, he said.

In the case of two-wheeler and small and medium enterprise (SME) loan pools, where collection ratios had declined to 95 per cent and 78 per cent, respectively, for June pay-out, but rose to 98 per cent and 90 per cent, respectively, for August, the report said. According to the agency's Senior Director Rohit Inamdar, securitisation volume after the second wave remains a pale shadow of what it was before the pandemic began. "What's encouraging, however, is the limited decline in collections after the second wave. The ongoing recovery should improve investor confidence and increase interest in securitisation transactions," he said. The agency said it will continue to monitor collection ratios, past trends and underlying asset quality of securitised pools under surveillance.