Securitisation market sees 20% dip in volume in H1 FY18

The country's securitisation market has seen a 20 per cent fall in transaction volumes to Rs 36,000 crore in the first half of fiscal 2017-18 due to GST uncertainty and pick up in priority sector lending certificate market, said a report today.
Transaction volumes in the securitisation market was Rs 45,000 crore in the year-ago period.
"A sharp pick-up in priority sector lending certificates (PSLCs) market an alternate route available to banks to meet their PSL requirements - and lack of clarity surrounding incidence of GST on the assignment of secured loan receivables were the major factors contributing to the slowdown," said the report released by rating agency Icra.

Securitisation market is characterised by two types of transactions rated pass through certificates (PTC) transactions and unrated direct assignment (D A) transactions.
Volumes for PTC transactions in H1 FY18 declined sharply of around 30 per cent falling to Rs 15,200 crore from Rs 21,500 crore in H1 FY17.
D A transactions saw volumes falling by around 13 per cent during the same period.

"Out of the total market volume of nearly Rs 36,000 crore, around 70 per cent comprised of PSL assets. With PSL still the driving force behind securitisation in the country, a shift by banks towards PSLCs could lead to stagnation of securitisation market volumes in the coming years," the report said.

Securitisation volumes have dropped across asset classes on a y-o-y basis in the current fiscal.
While vehicle loans exhibited a small correction of only 3 per cent, the sharpest drop was seen in micro loan securitisation with volumes for this asset class coming down by around 80 per cent.
The reduction seen in micro loan securitisation was the largest contributor to the overall reduction in PTC volumes.
Other asset classes like unsecured business loans and tractor loans have also seen volumes drop by more than 50 per cent when compared to last year.
A similar trend was seen for housing and LAP loans as well although the extent of correction is slightly lower. transaction volumes.

The report further said securitisation market volumes tend to pick up in the second half of the year (previous year was however an aberration on account of demonetisation).
The same trend is expected to continue this year too.
For the full year, the rating agency expects volumes for the current fiscal to be slightly lower than Rs 90,000 crore in the fiscal 2017.