Securitisation transactions in H1FY21 plunge 80%: Crisil

Rating firm Crisil on Tuesday said that securitisation transactions in the first half of the current fiscal plunged 80% year-on-year (y-o-y) to just over Rs 20,000 crore by value. The securitisation volume stood at Rs 96,000 in the same period last financial year. However, September saw a rebound in transactions to around Rs 10,000 crore as economic activity began clawing back after lockdown. Securitisation is a common method used by non-bank lenders to free up capital and generate immediate liquidity by selling loan portfolios to those looking to build their loan books.

Krishnan Sitaraman, senior director, Crisil Ratings, said, “Disbursements by non-banks had declined sharply in the first half as business activity hard-braked. That also reduced the need for non-banks to access the securitisation market to churn assets.”

The securitisation volume in the first half of fiscal 2018 was around Rs 37,000 crore, which surged to Rs 68,000 crore in the same period of fiscal 2019, and onwards to Rs 96,000 crore in the first half of fiscal 2020. Non-banking financial companies (NBFCs) had to increasingly take recourse to securitisation to raise funds after IL&FS default. Securitisation proceeds accounted for 26% of the disbursements done by the top 20 non-banks in fiscal 2020. In FY19 and FY18, the numbers were 18% and 12%, respectively. In terms of asset classes, commercial vehicle and gold loans comprised more than half of the transaction volume in the first half of this fiscal.

While private banks and insurers remained the main investors, public sector banks and NBFCs also put money into some securitised pools. However, mutual funds, major investors in recent years, have been largely inactive this fiscal. Investors preferred to acquire loans given to borrowers who had not opted to avail of the moratorium from June to August this year. Reserve Bank of India (RBI) had allowed a repayment break to borrowers for six months from March 1, 2020.

Rohit Inamdar, senior director, Crisil Ratings, said, “As more data becomes available on borrower behaviour at portfolio and pool levels, and if they point to predictable, and pre-pandemic-level, collection efficiencies, investor interest will increase.” The contours of the one-time restructuring likely for borrowers will determine the extent of the securitisation recovery in the near term, he added. The central bank had permitted one-time restructuring of personal and corporate loans for borrowers impacted by Covid-19.