Indian securitisation market adapting well to revised norms: CRISIL

The securitisation market is gradually widening, through the addition of gold loans as an asset class and participation from a broader set of originators

The Indian securitisation market is adjusting well to the revised securitisation guidelines issued by the Reserve Bank of India (RBI) in May 2012. After a brief pause following their introduction, market activity has resumed. Total market volumes from May to mid-October 2012 were stable, at Rs 3,400 crore (38 transactions), as against Rs3500 crore (38 transactions) for the corresponding period of the previous fiscal, said a press release issued by rating agency CRISIL.

The revised guidelines inhibit credit enhancement in direct assignments, thereby diminishing the attractiveness of the route, leading to a shift to the pass through certificate (PTC) route. Transactions through the PTC route have accounted for more than 85% of the total issuances since the guidelines were issued, as against less than 20% in 2011-12.

The securitisation market is also gradually widening, through the addition of gold loans as an asset class and participation from a broader set of originators. CRISIL believes that resolution of a few additional issues can help sustain and increase market activity.

According to Pawan Agrawal, senior director, CRISIL Ratings, there was a brief pause in securitisation activity after the issuance of the revised norms, during which time issuers accumulated eligible assets and evaluated the economics of securitisation. Since then, the market has resumed, and CRISIL has seen a structural shift toward the PTC route, which is more capital intensive for originators vis-à-vis direct assignments.