Securitisation volumes dip 27.6 % in FY15

Classification of priority sector lending assets and minimum margin fixed for these also reduced assets qualifying for securitisation

The pace of loan securitisation slowed sharply in 2014-15, with transaction volumes at Rs 21,000 crore against Rs 29,000 crore in 2013-14, according to rating agency Brickworks.

The share of asset-backed securities, including micro finance receivables, had an 85 per cent share (in value).

Securitisation involves pooling debt/loans such as home mortgages, automobile loans or credit card debt obligations, and selling these to third-party investors as securities (bonds or pass-through securities).

The agency said there had been a drop in rated volumes over the past three years. The Reserve Bank of India’s rule revisions for minimum holding period and retention ratio had affected the amount of loans which could be packaged with credit enhancement and sold to investors through receipts. The classification of priority sector lending assets and the minimum margin fixed for these had also reduced the assets that qualify for securitisation.

India’s market in this segment is still driven mainly by banks, the main investors. They, in turn, look at meeting their requirements and increasing their balance sheet size from assets that are typically generated by finance companies.

The share of commercial vehicle finance, the most securitised asset in India, has reduced over three years from 72 per cent to 56 per cent of the total. In contrast, the share of microfinance receivables had risen steadily from 12 per cent to 26 per cent in 2015, Brickworks said. Appetite for the latter remains high due to priority sector classification norms, increased regulatory oversight in the sector, leading to lower risk perception by the investor, and the attractive tenure of such instruments (average around 21 months).

In microfinance receivables, the share of multi-originator pools was around 29 per cent for FY15. The share of tractor pools also increased, with rising credit disbursal here.

For the first time, there were deals in commercial mortgage backed securities (CMBS), worth Rs 1,240 crore. The total MBS market issuance size (rated) was Rs 3,106 crore. The deals were done for properties owned by the DLF and Raheja groups.