Collection recovery in securitisation yet to reach March 2021 levels

With the resumption of economic activity, the collection efficiency for securitisation transactions moved up from 67 per cent in May 2021 to 79 per cent in July. However, it is yet to reach March 2021 levels of 83 per cent, according to India Ratings (Ind-Ra).

The performance of 143 rated securitisation deals showed the recovery has improved sentiments and supported the loan performance in June-July 2021. Overdue loans in softer delinquency buckets started performing with the gradual lifting of Covid-19 pandemic-related restrictions and this trend was prominent in secured asset classes.

Uncollateralised asset classes such as loans and unsecured business loans continue to underperform as before, the agency said.

The recovery in collections of weak profile borrowers in unsecured loans remains low, possibly as the broader economic and business activities are yet to achieve normalcy.

Of the 12 Ind-Ra rated transactions that are on Rating Watch Negative, 10 are from the pools pertaining to unsecured asset classes and two transactions are impacted by counterparty-related risks.

The rated unsecured business loan transactions have seen utilisation of external credit enhancements in the last 12 months. However as collections are improving post the second wave of Covid-19, the speed of utilisation has moderated.

As vaccination rates are improving in the country, business disruptions from any further covid wave and the risk of its effects on rated transactions are reducing gradually. However, the agency is continuing to test transactions for elevated pandemic-related disruptions while reviewing and assigning ratings, it added.