Securitisation volumes pick up post-Q1 FY22 as collections improves: Report

India Ratings and Research on Friday said securitisation volumes have picked up post the second wave lull in the first quarter of the current fiscal, helped by the improvement in collections.

The agency, however, believes that the recovery from the impact of the second wave is not yet complete.

It has witnessed a recovery in average current collection efficiency to 79 per cent in July 2021 from 67 per cent in May 2021 across 143 of its rated securitisation transactions.

"Securitisation volumes have picked up post the second wave lull in Q1 FY22 as investors witnessed the return to normalcy in collection metrics. As investors gain confidence, overall securitisation volumes in FY22 could be better than in FY21," the agency said in a report.

Securitisation is the process of pooling and repackaging of homogenous illiquid financial assets into marketable securities that can be sold to investors.

The report said resumption of economic activities post the second Covid wave improved sentiments and supported the loan performance in June-July 2021.

Overdue loans in softer delinquency buckets started performing with the gradual lifting of pandemic-related restrictions and this trend was prominent in the secured asset classes.

Given the low number of rated transactions in some of the asset classes (such as tractor loans), the average collection efficiency may not indicate the market level collection efficiency.

The recovery in collections of weak profile borrowers in unsecured loans remain low, possibly as the broader economic and business activities are yet to achieve normalcy.

"Overall for the agency rated transactions, the average current collections efficiency had reduced by 16.2 percentage points in April-May 2021 but recovered by 11.6 percentage points in June-July 2021, signifying that the recovery from the impact of the second wave is not yet complete," it said.

The agency expects intensive collection efforts and improvement in broader business activities in August 2021 along with the momentum in vaccination rate to continue to support the improvement in collections in August and September.