Securitisation volumes to jump 50% to Rs 1.3 trillion in FY22: Report

Icra on Thursday said domestic securitisation volumes are expected to be higher in the second half of the fiscal, which will result in a 40 per cent jump in overall volumes to Rs 1.3 trillion in FY22

Domestic ratings agency Icra on Thursday said domestic securitisation volumes are expected to be higher in the second half of the fiscal, which will result in a 40 per cent jump in overall volumes to Rs 1.3 lakh crore in FY22.

Monthly collection efficiency across asset classes improved materially from the lows of May 2021, the agency said, adding that incremental repayments overdue for over 90 days have also declined across asset classes.

With business operations of lenders achieving near normalcy and improving investors' confidence regarding the stability of cash flows coupled with improving vaccination coverage, securitisation volumes are expected to be higher in the second half of FY22, it said.

"We do not foresee any immediate decline in the collection efficiencies of the retail pools. While the threat of another wave of Covid infections remains, we expect that the past experience would make the state and central governments as well as the companies better equipped to handle such an event so as to ensure least disruption to economic activities," its head for structured finance ratings Abhishek Dafria said.

The securitisation volumes will reach about Rs 1.21.3 lakh crore for FY22 which would imply a 40-50 per cent increase from the volumes seen in FY21, the agency said.

For the first five months of the fiscal, the volumes have been about Rs 28,000 crore which is already about twice the volumes seen in similar period last year.

Securitisation volumes are expected to see a sharp jump in the second half of the fiscal, especially in the last quarter, as disbursements for NBFCs and HFCs pickup leading to increase in financing requirements, it said.

"Due to limited disbursements in the first quarter, NBFCs would not have adequate loans that can be securitised while meeting RBI's minimum holding period criteria for securitisation. Thus, we expect securitisation volumes to be very strong in Q4 as was the case last year when almost 45 per cent of the annual securitisation was done in the last quarter, Dafria said.

Preference for loans with collateral such as mortgage loans or gold loans has been higher post Covid; however, we expect pickup in securitisation volumes for even microfinance and unsecured business loans in the second half supported by healthy collections and tighter filters in pool selection, he said.

However, we may still be a few quarters away from achieving the pre-Covid securitisation volumes, especially for the unsecured loan category, he added.