Pickup in credit demand for NBFC, HFC led to strong securitisation volume: Icra

  • The increase reflects a 1.9 times jump when compared to 17,200 crore of securitised assets in Q1 FY2022 and a 4.4 times increase compared to 7,500 crore in Q1 FY2021

Livemint
First Published11 Jul 2022
The securitisation volumes witnessed in Q1 FY2023 were almost double the volumes seen in Q1FY2022. Photo: Mint
The securitisation volumes witnessed in Q1 FY2023 were almost double the volumes seen in Q1FY2022. Photo: Mint

A healthy pickup in credit demand may raise the securitisation volumes, originated largely by non-banking financial companies and housing finance companies to about 33,000 crore in Q1 FY2023, according to ratings agency Icra.

The increase reflects a 1.9 times jump when compared to 17,200 crore of securitised assets in Q1 FY2022 and a 4.4 times increase compared to 7,500 crore in Q1 FY2021. The key reason for healthy volumes in Q1 of the current year is the overall macroeconomic stability with no major disruptions which resulted in robust credit growth for NBFCs and HFCs on a YoY basis, Icra said in a report.

As opposed to this increase, in the previous two years, the first quarter of each year had been hit by the Covid-19 pandemic resulting in lockdowns and reduced credit demand due to slowdown in economic activities.

“The securitisation volumes witnessed in Q1 FY2023 were almost double the volumes seen in Q1FY2022. With the growth in credit demand, the disbursements picked up for NBFCs and HFCs in Q4 FY2022 and have remained buoyant in Q1 FY2023 thereby resulting in higher funding requirements which have been partly met through the securitisation of their retail loans. Securitisation is a key tool for these companies which will help them diversify the means of funding and broaden their investor base,” said Abhishek Dafria, vice president and group head - Structured Finance Ratings.

Stable collections across all asset classes have led to higher investors’ confidence and brought them back to the securitisation market. "Collection efficiencies have remained healthy over the past 5-6 months with ICRA-rated pools showing 97-101% collection in April 2022, a month when collection efforts are otherwise typically low. If there are no pandemic related disruptions, we expect securitisation volume could cross 1.5 lakh crore in FY2023 as against Rs. 1.3 lakh crore in FY2022,” he added.

Securitisation of mortgage-backed loans dominated with 46 share in total securitisation volumes followed by vehicle loan segment that accounted for 26% and microfinance at 11%. The number of originators who securitised their assets in Q1 FY2023 increased sharply to 70 from 46 in Q1 FY2022.

 

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