Delinking ratings from credit profile may hit securitisation, says CRISIL

The ability of credit rating agencies and investors to differentiate the credit quality of securitised instruments from their servicers and originators could be affected, says CRISIL.

Delinking ratings on securitised instruments from the credit profiles of originators is likely to affect liquidity to companies, agency CRISIL has said.

There has been a spate of downgrades and defaults on securitised instruments backed by receivables originated by Dewan Housing Finance Corporation Ltd (DHFL) in the past three months.

The rating actions were triggered primarily by legal challenges that call into question the basic tenets of securitisation. These developments will need to be monitored closely and have the potential to impact the growth of India’s developing securitisation market

The legal and regulatory developments raise questions on the very basis of delinking the