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Non-bank asset sales to push securitisation volumes to 2 trillion in FY20, says ICRA

  • The securitisation market continues to soar as the liquidity crisis in NBFC sector has shown no immediate signs of abetting, says ICRA
  • Mortgage loans constituted the largest asset class with around in direct assignment market and around 46% share in Q1 FY20

Mumbai: The securitisation market will remain buoyant for the remainder of FY20 and touch an all-time high, with an estimated volume of more than 2 trillion, said credit rating agency ICRA.

The securitisation market continues to soar as the liquidity crisis in the non-banking financial company (NBFC) sector has shown no immediate signs of abetting, it said.

According to ICRA, In the June quarter of FY20, the Indian securitisation market clocked the highest issuance volumes seen in the first quarter of any financial year at 50,300 crore, registering a year-on-year (y-o-y) growth of 56%. In comparison, the securitisation volumes were 32,300 crore in Q1 FY19 and 1.99 trillion for the entire FY19.

Vibhor Mittal, group head – structured finance ratings at ICRA said NBFCs and housing finance companies (HFCs) continue to rely heavily on securitisation as a tool for raising funds and manage liquidity.

“Other on-balance sheet funding avenues from both banks and capital market investors continue to be limited for most entities (barring a few entities with a strong credit profile). Banks, especially public sector banks, continue to remain the largest investor segment demonstrating strong appetite for acquiring both priority sector loans and non-priority sector assets through retail loan portfolio buyouts," said Mittal.

The securitisation market in India, ICRA said, can be segregated into two types of transactions – rated pass through certificate (PTC) transactions, and unrated direct assignment transactions or bilateral assignment of pool of retail loans from one entity to another.

As per ICRA estimates, the PTC transaction volumes increased by a whopping 95% to 22,000 crore in Q1 FY20 from 11,300 crore in Q1 FY19, while volumes for direct assignment transactions increased by around 35% y-o-y to 28,300 crore.

“It is notable that the market volumes have increased despite lukewarm participation from a few originators that have traditionally been large and active participants due to their weakened credit profile, that may also have impacted their ability to securitise," said ICRA.

Mortgage loans constituted the largest asset class with around in direct assignment market and around 46% share in Q1 FY20. Other asset classes like micro loans (around 20% share) and vehicle loans (around 17% share) continued to receive strong appetite from investors due to priority nature of these assets, it said.


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