Securitisation volume plunges 85% in Q1 FY21: Crisil

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SME Times News Bureau | 13 Jul, 2020
Securitisation volume plunged 85 per cent to Rs 6,200 crore in the first quarter of financial year 2020-2021, because of slow collections following the lockdown and the loan moratorium offered by lenders, a Crisil report said on Monday.

The report said that the decline comes after 15 months of "frenetic" activity that was mainly driven by non-banking finance companies (NBFCs).

"Deferment of transactions is along expected lines. Limited disbursements in the first quarter reduced the immediate liquidity needs of some larger, well-capitalised NBFCs," said Krishnan Sitaraman, Senior Director, Crisil Ratings.

"On the demand side, a vast majority of investors are waiting for clarity on economic activity and borrower cash flows and the consequent impact on collections stability," Sitaraman said.

According to the report, asset-backed securities (ABS) remained the dominant segment comprising 74 per cent of the overall securitised volume in the quarter. Mortgage-backed securities (MBS) constituted the balance volume.

Direct assignment (DA) route, being the most-preferred for securitisation of MBS deals, accounted for nearly two-thirds of all deals. However, the partial credit guarantee scheme for direct assignment transactions announced by the government did not draw much traction in the just concluded quarter.

About 34 per cent of the market adopted the pass-through certificate (PTC) route of securitisation.

However, in stark contrast with the overall market performance, transactions backed by gold-loan receivables bucked the trend. They comprised nearly half of the total securitisation transactions in the first quarter.

That compares with 20 per cent, 7 per cent, and 2 per cent in the comparable periods of fiscals 2020, 2019 and 2018, respectively.

The increase in gold loan-backed securitisation is because of the relatively short tenure of the loans, their strong performance over the past few years, and secured nature of the asset class in a rising gold price environment.

Barring this asset class, the number of originators was limited in the first quarter. Only marquee players were able to draw some interest, especially from private investors such as insurers and new private banks, the report said.

Mutual funds have largely stayed away.

As per the report, a return to pre-lockdown volume is likely only gradually. With economic activity gathering pace in June, collections have started to improve, though they are still a long way from pre-lockdown levels.

Securitisation volumes also picked up with 67 per cent of the quarterly volume coming in the month.

Rohit Inamdar, Senior Director, Crisil Ratings said: "There is no doubt that securitisation will remain an important tool for NBFCs to mobilise liquidity. With the phased opening-up of the economy, we expect the current quarter to see more transactions than the first quarter."