Securitisation volumes to get back on growth track in FY22: Icra

Credit quality of the rated pass-through certificates (PTCs) should remain 'Stable' during FY22, says rating agency

The securitisation volumes, especially in retail loans of finance firms and mortgage lenders, will see healthy growth in FY22, after a contraction in FY21 so far. The volume is estimated to rise to Rs 1.2-1.5 trillion in FY22 from Rs 0.6-0.8 trillion in FY21, according to rating agency ICRA.
 
The securitisation involves the conversion of an asset, especially a loan, into marketable securities, for raising cash by selling them to investors. Also, the credit quality of the rated pass-through certificates, instruments with underlying loans, should remain ‘Stable’ in FY22. Though colle­ctions may not have reac­hed pre-Covid levels, the credit enhancement available has supported their credit quality.

 
The securitisation activity was adversely affected by economic disruption after the Covid-19 pandemic. It recorded volume of Rs 0.23 trillion in April-September 2020 (H1FY21). In Fy20, securitisation volume was about Rs 1.97 trillion almost on par with Rs 1.99 trillion in FY19.   
 

The rating agency said an increase in securitisation volumes for the rest of FY21 in FY22 would be supported mainly by growing investor confidence in asset quality due to improving collections. Higher funding requirement of originators on account of rising disbursements and improving business activity post end of lockdown and moratorium period would give a push to activity.

 
“Collections across all asset classes have bounced back sharply since the dip in April following the lockdown,” said Abhishek Dafria, vice-president and group head, structured finance ratings, ICRA.