NBFC MFI funding from securitisation deals up 170% to Rs 26,200 cr in FY19

SBI led the rise, buying portfolios worth Rs 45,000 cr, say MFIs; 43 firms raised funds via securitisation in FY19 versus 24 in FY18; Of these, 14 were first-time entrants

Amid tight liquidity, NBFC MFIs (Non-Banking Finance Company-Microfinance Institutions) raised close to Rs 26,200 crore through securitisation deals in the last financial year, a massive rise of 170 per cent over 2017-18, according to a report by credit rating agency Icra. NBFC-MFIs had raised close to Rs 9,700 crore in the financial year 2017-18.

According to MFIs, one of the factors behind the rise in securitisation deals was State Bank of India’s (SBI) decision to buy portfolios worth Rs 45,000 crore from NBFCs. Soon after the liquidity crisis in the NBFC sector in September 2018 after IL&FS defaulted its loan obligation, SBI had announced that it was buying the portfolios of NBFCs to ease the liquidity situation.

For example, Arohan, one of the biggest NBFC-MFIs, sold close to Rs 600 crore of its loans to SBI, according to Manoj Nambiar, the managing director of the company.

“This year, SBI was one of the biggest buyers in the securitization markets in the NBFC MFI sector,” said another top official of an NBFC-MFI.

This apart, according to industry experts, in 2017-18, the volume of securitisation deals by NBFC MFIs was low due to the presence of portfolios originating at the time of demonetisation, which had high rates of default.

Icra notes that last year, much of the securitisation was on account of direct assignment (DA). As per Icra estimates, transaction volumes undertaken by NBFC-MFIs on account of DA were around Rs 13,500 crore for FY2019, as against only Rs 4,000 crore and Rs 3,000 crore in FY18 and FY17 respectively.

Notably, in January this year, eighteen micro finance non-banking financial companies (NBFC-MFIs), for the first time had pooled assets worth for securitisation, to collectively tide over a liquidity problem in the sector.  

“In addition to the increase in volume, this time the securtisation market in the MFI sector saw innovation. The pool was created to tide over liquidity crunch, bringing together portfolios of both small and big MFIs,” according to Harsh Srivastava, CEO, MFIN.

“Securitisation has always been an important funding tool for NBFC-MFIs, but the dependence was particularly high during the second half of fiscal 2019,” according to Vibhor Mittal, Group Head – Structured Finance Ratings at Icra.

“In FY2018 and H1 FY2019, securitisation contributed to only 18-20 per cent of the overall disbursements. However, this number leapfrogged to 37 per cent and estimated 50 per cent in Q3FY19 and Q4FY19 respectively. In other words, almost half of incremental disbursements in Q4FY19 is estimated to have been met through the securitisation route,” according to Mittal.

Close to 43 entities raised funds through the securitisation route in FY19 (as opposed to only 24 such in FY18). Of these, as many as 14 entities were first-time entrants in the securitisation market. The yields were higher by 100-150 bps for both Priority Sector Lending (PSL)-driven and non-PSL transactions in Q3FY2019 over the lows seen in FY 2018, according to Icra.