Securitisation volume surges 70%

Mumbai: Securitisation volumes shot up 70 per cent to Rs35,000 crore in June quarter and the credit growth at non-banks may take the number to the pre-pandemic highs of Rs1.9 lakh crore in FY23, Crisil Ratings said on Thursday.

The volumes were high in first quarter of FY23 primarily due to increase in economic activity, while the high growth came on the back of a low base, it said. Volumes of securitization, where a financier raises money by giving up on future loan receivables, in the first quarter could have been even higher but for the rising inflation and higher interest rates that have spawned caution over the repayment ability of borrowers, and divergent yield expectations among originators and investors, it said.

Despite the apparent return of enthusiasm among participants, a number of deals fell through at the quarter-end. Still, negligible disruption in collections and stable pool performance supported uptick in volume, the agency said. Mortgage-backed securitisation (MBS) loans comprised 45 per cent of quarterly volume as compared with 53 per cent in the corresponding period of the previous fiscal. Asset backed securitisation (ABS) comprised the balance, it said.

"More than 80 non-bank entities being present in the market in the first quarter, up from 50 last fiscal, indicates strong comfort originators have with the securitisation process," its senior director and deputy chief ratings officer Krishnan Sitaraman said. In ABS, commercial vehicle loans comprised 49 per cent, and microfinance 20 per cent of transaction value, with many underlying loans eligible for priority sector lending (PSL) classification.

Gold loans (14 per cent) continued to shine, while two-wheeler, education, school finance and unsecured loans saw renewed investor interest. Public and private sector banks were the largest investors driven by their retail drive and PSL targets. They invested in more than two-thirds of the quarterly securitised volume.

Foreign financial institutions, including banks, acquired 17 per cent of all assets securitised, the agency said. A stable market environment could mean deeper participation by other large investors, including foreign institutions and mutual funds. These groups were key players in the pre-pandemic market.

Time-tranched or replenishing structures, and high-yield asset classes such as lease rental and personal loans could persuade them to return, it said. "Until now, banks were the dominant investors in securitisation. Others, including foreign investors, may be drawn by the stable performance of past pools and be willing to experiment with innovative structures and newer asset classes," its senior director Rohit Inamdar said.