The transaction volumes in the Indian securitisation market fell by nearly 20 per cent in April-September 2017 (H1 FY18) to Rs 36,000 crore from Rs 45,000 crore for the same period in FY17.
According to rating agency ICRA, a slowdown in activity was caused predominantly by two factors. First, sharp pickup in Priority Sector Lending Certificates (PSLCs) market – an alternate route available to banks to meet their PSL requirements hit securitisation. Second, the lack of clarity surrounding incidence of GST on the ‘assignment’ of secured loan receivables had bearing on volumes.
ICRA said this trend is in line with the earlier observation that retail loan sell down volumes may get impacted in FY18 due to growing comfort in using PSLCs for meeting priority sector targets. These volumes had touched an all-time high of Rs 90,000 crore in FY17.
Typically, the securitisation market in India is characterised by two types of transactions – rated Pass-through certificates (PTC) transactions and unrated Direct Assignment (D.A) transactions (bilateral assignment of retail loan pools).
Volumes for PTC transactions in H1 FY18 registered a sharper decline of around 30 per cent falling to Rs 15,200 crore from Rs 21,500 crore in H1 FY17. The Direct Assignment transactions, on the other hand, saw volumes fall by around 13% during the same period.
Vibhor Mittal, Head – Structured Finance at ICRA says, “Out of the total market volume of nearly Rs 36,000 crore, around 70% comprised of PSL assets”.
With PSL still the driving force behind securitisation in India, a shift by banks towards PSLCs could lead to stagnation of securitisation market volumes in the coming years.
PSLCs had begun gaining acceptance in the previous fiscal itself with trading to the tune of Rs 50,000 crore in entire FY17. In comparison, the first six months of FY18 alone have witnessed around Rs 85,500 crore worth of PSLCs being traded, ICRA said.