At Rs 26,200 crore, NBFC-MFIs see 170% rise in securitisation deals in FY19

Amid the tight liquidity situation, non-banking finance company-microfinance institutions (NBFC-MFIs) raised close to Rs 26,200 crore through securitisation deals in the last financial year. 

This is a whopping rise of 170 per cent over 2017-18, according to a report by credit rating agency ICRA. NBFC-MFIs had raised close to Rs 9,700 crore in the financial year 2017-18.

According to MFIs, one of the factors behind the rise in securitisation deals was State Bank of India’s (SBI) decision to buy portfolio worth Rs 45,000 crore from NBFCs. 

Soon after liquidity crisis in the NBFC sector in September 2018 when IL&FS defaulted on its loan obligation, SBI had announced that it would buy the portfolios of NBFCs to ease the liquidity situation.

For instance, Arohan, one of the biggest NBFC-MFIs, sold close to Rs 600 crore loans to SBI, according to Manoj Nambiar, managing director, Arohan.

“This year, SBI was one of the biggest buyers in the securitisation markets in the NBFC-MFI sector,” said another top official of an NBFC-MFI.

According to industry experts, in 2017-18, the volume of securitisation deals by NBFC-MFIs was low due to the presence of portfolio originating at the time of demonetisation, which had high rate of default.

ICRA notes that last year, much of the securitisation was on account of direct assignment. According to ICRA estimates, transaction volumes undertaken by NBFC-MFIs on account of direct assignment were around Rs 13,500 crore for FY19, against only Rs 4,000 crore and Rs 3,000 crore in FY18 and FY17, respectively.

Notably, in January this year, 18 micro finance non-banking financial companies (NBFC-MFIs) for the first time pooled assets for securitisation in order to collectively tide over a liquidity problem in the sector.  

“In addition to the increase in volume, this time, the securtisation market in the MFI sector saw innovation. The pool was created to tide over liquidity crunch, bringing together portfolios of both small and big MFIs,” said Harsh Srivastava, CEO, Microfinance Institutions Network.

“Securitisation has always been an important funding tool for NBFC-MFIs, but dependence was particularly high during the second half of fiscal 2019,” according to Vibhor Mittal, group head — structured finance ratings at ICRA.

“In FY18 and first half of FY19, securitisation contributed to only 18-20 per cent of the overall disbursements. However, this number leapfrogged to 37 per cent and estimated 50 per cent in Q3 FY19 and Q4 FY19, respectively.