Increased investors confidence reflected in the recovery
Domestic securitisation volumes have more than doubled to ~Rs.15,200 crore in Q2 of FY2021 from Q1 FY2021’s ~Rs.7,500 crore, supported by reduced investor wariness as well as increase in disbursements by non-banking financial institutions (NBFCs) thereby leading to higher financing needs.
“Though the securitisation volumes for H1 FY2021 declined considerably when compared with H1 FY2020, on a quarterly basis the volumes more than doubled in Q2 FY2021 over the preceding quarter,” said Abhishek Dafria, Vice President and Head – Structured Finance Ratings at ICRA,
“We expect the momentum in securitisation volumes to continue in H2 FY2021 supported by increased investor confidence, increase in finding requirement of originators as they re-start disbursement and steady easing of business activity as lockdowns end,” he said in comments on the market on 22 Oct 2020.
As per an ICRA note, investors are drawing confidence from the healthy increase seen in collection efficiencies across all asset classes.
The proportion of assets under management (AUM) which was under moratorium declined gradually from April 2020 to August 2020 as the moratorium provided by the Reserve Bank of India (RBI) under the ‘Covid-19 Regulatory Package’ drew to a close.
Overall, about 45 originators undertook securitisation in Q2 FY2021 as against only 18 originators seen in Q1 FY2021.
Investors have, however, tightened their eligibility criteria for pool selection. Pools available with originators are also relatively lower given the lack of fresh disbursements over the past 6-7 months.
“We nonetheless expect securitisation volumes in H2 FY2021 to be more than double the volumes seen in H1 FY2021,” he said, estimating securitisation volumes to be about Rs.0.8 ~ Rs.0.9 lakh crore for FY2021, though still significantly lower than the ~Rs.2 lakh crore volumes seen in FY2020.
An increase in share of the gold loan in securitisation, a trend witnessed in FY2020, continued in H1 FY2021 wherein 16% of the value of loans securitised were gold loans.
Both Commercial vehicle (CV) loans as well as mortgage-backed securities (MBS) emerged as the leading asset classes, each accounting for one-third of overall volumes in H1 FY2021.
In Q2 FY2021, CV sector continued its momentum and its share in quarterly volumes remained at a similar level of around 30-35%. However, MBS (HL + LAP) transactions witnessed heightened activity as its share in quarterly volume increased from 26% in Q1 FY2021 to 37% in Q2 FY2021. This is because collection performance in this segment was least impacted throughout the moratorium period.
“We have witnessed sustained sequential improvement in the collection efficiencies of ICRA-rated pools comprising of retail-loan receivables across different asset classes, after the precipitous fall in April 2020 in the aftermath of nationwide lockdown led by the pandemic,” elaborated Sachin Joglekar, Assistant Vice President, ICRA,
The average collection efficiency for all the asset classes improved to more than 75% as of August 2020 month. Among the segments, the collections in mortgage-backed securitisation transactions remained least impacted and showed remarkable resilience on account of prevailing online collection practices and salaried borrower class in the segment,” he said. #banking #investment #finance #economy /fiinews.com
