Securitisation volume dips 85% to Rs 6,200 cr in Q1FY21 on slow collections

The Securitisation volume plunged by 85 per cent to Rs 6,200 crore in the first quarter ended June 2020 (Q1FY21) on slow collections following the lockdown in India. The loan moratorium also impacted volumes, according to rating agency CRISIL.

However, in stark contrast with the overall market performance, transactions backed by gold-loan receivables bucked the trend. They comprised nearly half of the total securitisation transactions in the first quarter.

In Q1FY20, the share of gold loans was 20 per cent, in Q1FY19 it stood at 7 per cent and was a meagre 2 per cent in Q1FY18. CRISIL said.

The increase in gold loan-backed securitisation is due to the factors like the relatively short tenure of loans and and secured nature of the asset class in a rising gold price environment.

Referring to trends in June quarter, Krishnan Sitaraman, senior director, CRISIL Ratings, said, “Deferment of transactions is along expected lines. Limited disbursements in the first quarter reduced the immediate liquidity needs of some larger, well-capitalised NBFCs”.

On the demand side, a vast majority of investors are waiting for clarity on economic activity, borrower cash flows and the consequent impact on collections stability. The improvement in collection efficiencies and the pick-up in economic activity is crucial to turning the tide, CRISIL said.

The asset-backed securities (ABS) remained the dominant segment comprising 74 per cent of the overall securitised volume in the quarter (58% in Q1FY20). Mortgage-backed securities (MBS) constituted the remaining volume.

Direct assignment (DA) route, being the most-preferred for securitisation of MBS deals, accounted for nearly two-thirds of all deals.

However, the partial credit guarantee scheme for direct assignment transactions announced by the government did not draw much traction in the just concluded quarter.

The number of gold loan originators, too, has risen from two in first three months of fiscal 2020 to 5 so far this fiscal.  Barring this asset class, the number of originators were limited in the first quarter.

Only marquee players were able to draw some interest, especially from private investors such as insurers and new private banks. Mutual funds have largely stayed away, the rating agency said.