Mumbai: Retail securitization volumes more than doubled to ₹1.9 trillion for FY19 when compared with the previous year, driven largely by need of non-bank lenders to raise capital amid a liquidity crisis, according to a report from rating agency Crisil on Friday. Total securitization volume reported in fiscal 2018 stood at ₹85,000 crore.
Securitization allows lenders to sell a part of their assets (loans) to raise capital for further deployment or other business purposes.
The spurt in securitization was pushed by non-banks (housing finance companies and non-banking financial companies), which rushed to securitize receivables as conventional sources of resource mobilization came under pressure after September 2018.
Another reason for higher activity was the Reserve Bank of India (RBI) relaxing the minimum holding period requirement, which increased the availability of eligible securitizable assets. Also, a few large mortgage players returned to the market in the first quarter of fiscal 2019 after clarification that securitized assets are not liable to attract goods and services tax (GST), the report said.
“Three asset classes, mortgages, vehicle loans and microfinance loans constituted 84% of the securitization volume," said Krishnan Sitaraman, senior director, Crisil.
“Growing investor comfort with these asset classes and steady asset quality metrics supported growth. We also saw relatively newer asset classes such as gold loans, small and medium enterprises loans and personal loans also getting securitized, underscoring a potential broad-basing of the market," he said.
Direct assignments (DAs) continued to be the preferred route, accounting for 64% of the total securitization volume. Mortgage-backed transactions originated by housing finance companies and invested in primarily by public sector banks accounted for a bulk of the DA volume, with 92% of mortgage transactions happening through the DA route.
“We believe securitization will continue to clock decent volumes despite changing market dynamics," said Rohit Inamdar, senior director at Crisil.
The RBI’s move to constitute a committee to enable development of housing finance securitisation also augurs well for the market, he said.