Securitisation volume up ~20% to ~Rs 1

Securitisation volume up ~20% to ~Rs 1.4 lakh crore in the first nine months of this fiscal

Securitisation volume continued on its upward momentum, surging ~20 per cent on-year to ~Rs 1.4 lakh crore in the first nine months of this fiscal, said a report by CRISIL Ratings. This, it added, is despite the exit of one of the largest housing finance company (HFC) originators in the second quarter of the fiscal. If one were to adjust for the HFC volume and consider only securitisations by other originators, the market grew by 40 per cent on-year.

The rise and spread of the market is expected to continue, given expected healthy credit growth among NBFCs, the retailisation agenda of banks that are the largest investors in the market, and the recent regulatory guidelines on risk weights by the Reserve Bank of India (RBI).

The pass-through certificate (PTC) route accounted for 54 per cent of the overall volume and direct assignment (DA) transactions comprised the rest, the CRISIL report said. Among asset classes, vehicle loans (including commercial vehicles, passenger vehicles and two-wheelers) cornered the biggest share (41 per cent; up from 32 per cent in the first nine months of last fiscal), followed by mortgages (20 per cent) and microfinance (16 per cent).

The volume of personal and business loan securitisations doubled (13 per cent of volume), with 230 pools securitised by 55 originators in the first nine months of this fiscal, compared with 150 pools securitised by 45 originators in the corresponding period of the previous fiscal.

In terms of the investor base, private banks dominated the market, accounting for 46 per cent of volume, followed by public sector banks which accounted for 25 per cent volume and foreign banks at 14 per cent. Participation by other investors such as mutual funds also increased, as they explore securitisation to diversify their investments and enhance risk-adjusted returns.

The third quarter also saw foreign banks eyeing investments in the microfinance space through the PTC channel to meet their priority-sector-lending requirements. The performance of past securitised pools has been an important factor in propelling investor confidence in microfinance and other unsecured asset classes.

The market also exhibited wider acceptance for replenishing structures. PTC transactions of over Rs 2,500 crore were structured with pre-defined replenishment periods, wherein the collections from the underlying pool are used to purchase new loan assets instead of amortising the PTCs, thereby elongating instrument durations to meet the tenure requirements of investors. Such transactions were seen across asset classes, from microfinance to vehicle, personal and business loans. Overall, the securitisation market continues to expand with more originators and newer transaction structures finding wider acceptance, it said.