Securitisation volume doubles to Rs 315 billion in the first quarter

The volume in securitisation has doubled to Rs 315 billion year-on-year basis in the first quarter (Q1FY19) on surge in as deals backed by loan receivables that do not qualify for priority sector (non-PSL), according to rating agency CRISIL. 

Mortgages continued to be the driver of non-PSL securitisation. The GST Council’s clarification that securitised assets are not liable to pay tax spurred some large mortgage players to tap the securitisation market once again, CRISIL said in statement.  Krishnan Sitaraman, senior director, CRISIL Ratings, till now, PSL receivables had ruled the securitisation market roost. But due to a rise in transactions involving non-PSL receivables, and increase in demand for priority sector lending certificates (PSLCs), non-PSL share increased to 64 per cent on year in first quarter of fiscal 2019 from 40 per cent.

Newer non-PSL asset classes, such as personal and consumer durables loan receivables, lease rentals and gold loan receivables, saw a significant increase in momentum in the first quarter and transactions surged to Rs 2.8 billion.

Demand for non-PSL asset-backed securitisation was driven by private banks, mutual funds, non-bank treasuries and insurers. They took advantage of attractive yields of 8.5 per cent to 11.5 per cent for instruments carrying rating of A (Structured Obligations-SO) category or higher. 

While non-PSL securitisation had a good outing, PSL securitisation continued to be impacted by rising popularity of PSLCs.

Overall, PSLC volume touched Rs 860 billion in the quarter, or 46 per cent of the number for the whole of last fiscal. Average PSLC pricing across segments dropped by 49 per cent on-year. The sharp rise in volume and the drop in PSLC pricing meant banks were less interested in taking the PSL securitisation route to meet their PSL mandate.

The yield on PSL-backed pass-through certificates (PTCs) during the quarter was in the range of 7.25 per cent to 7.9 per cent, compared with 5.9 per cent to 7.2 per cent seen in fiscal 2018.