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Rising covid-19 cases could dampen NBFC fund raises: Icra

The rating agency said due to the covid-19 pandemic and resultant nationwide lockdown, securitisation volumes had seen an unprecedented fall in the first six months of the financial year. Photo: Hemant Mishra/MintPremium
The rating agency said due to the covid-19 pandemic and resultant nationwide lockdown, securitisation volumes had seen an unprecedented fall in the first six months of the financial year. Photo: Hemant Mishra/Mint

  • NBFCs and housing finance companies (HFCs) securitised about 40,000 crore of their loan assets in Q4 FY21, which is similar to volumes seen in Q4 FY20, according to Icra estimates

Mumbai: The healthy activity seen in the securitisation market in Q4 of FY21 notwithstanding, rising covid-19 cases may again create uncertainty among investors and affect fund-raising for non-bank lenders, rating agency Icra Ltd said on Thursday.

Non-banking financial companies (NBFCs) and housing finance companies (HFCs) securitised about 40,000 crore of their loan assets in Q4 FY21, which is similar to volumes seen in Q4 FY20, according to Icra estimates.

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This implies a sharp quarter-on-quarter (q-o-q) growth of around 60%. The rating agency said due to the covid-19 pandemic and resultant nationwide lockdown, securitisation volumes had seen an unprecedented fall in the first six months of the financial year after two successive years of healthy volumes close to 2 trillion each.

Abhishek Dafria, vice-president and head (structured finance ratings), Icra Ltd said that on a positive front, the lockdowns announced by a few state governments at present are less restrictive in comparison to the nationwide lockdown seen last year.

“Nevertheless, an unabated increase in the covid cases is likely to bring about fears of harsher lockdowns which could impact the asset quality of retail loans especially for unsecured loans such as in the microfinance sector," said Dafria.

This in turn would impact the fund-raising ability of the NBFCs and HFCs through securitisation of their assets, he added.

For FY2021, securitisation through direct assignment transactions (bilateral assignment of pool of retail loans from one entity to another) accounted for about two-thirds of total annual volumes, in line with the trend seen over the past few years, the rating agency said. The balance one-third is through Pass Through Certificate (PTC) transactions where loans are sold to a special purpose vehicle (SPV) which issues PTCs.

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