Securitization collections improve to 79% in September: Report

India Ratings and Research on Tuesday said the average collections across its rated securitization transactions have inched up to 79 per cent in September this year from 70 per cent in May 2021.

The performance of securitization transactions has witnessed a continued improvement with the increase in September collections and a drop in delinquencies percentage across asset classes, it said.

As the economy started to open up due to acceleration in vaccine rollout, the average current collections across all India Ratings rated (securitization) transactions inched up to 79 per cent in September 2021 from 70 per cent in May 2021, the agency said in a report.

Securitization involves transactions where credit risks in assets are redistributed by repackaging them into tradable securities with different risk profiles. It may give investors of various classes an access to exposures which they otherwise might be unable to access directly.

The report said with improving market sentiments, business disruptions from any further COVID wave and the risk of its effects on the performance of its rated transactions are reducing gradually, it said.

Average collection in September 2021 witnessed a sharp improvement in tractor loan pools. The current collections from unsecured business loan transactions are still lagging as compared to the other asset classes, it said.

This is primarily because of the non-performance of small ticket-size loans. The pace of improvement in commercial vehicles loan pools is slow due to increased fuel cost, which continues to put pressure on the trucker's profit margins, the report said.

The agency witnessed a drop in delinquency percentages for its rated transactions across asset classes except in unsecured business loans.

The sharp improvement is seen in all other pools with delinquencies back to pre-second wave levels. The positive impact of the festive season is likely to be seen in October-November 2021 collections, it noted.