Nbfcs Securitisation To Pick Up

Securitisation will soon emerge as a tool in asset-liability management of non-banking finance companies (NBFCs), said a Credit Rating and Information Services of India Ltd (Crisil) release.

This was an encouraging sign, as securitisation brought down the weighted average maturity of assets by replacing long to medium term assets with cash, thereby avoiding asset liability mismatch seen in most NBFCs portfolios.

While NBFCs were facing a dearth of funds, they still had a large network and hence lower costs as compared to multinational and foreign banks. But size, managerial talent and credit rating gave banks stronger funding capacity. A combination of these two, achieved through pooling of resources, could ensure them a steady flow of income, the release said.

 

While the trend towards securitisation was discernible in auto loans, it was likely to extend to housing loans, which were longer in duration and hence more difficult to raise, the release added. According to Crisil, institutional investors would also allocate more funds in asset-backed securities, as they were being viewed by investors more favourably than in the past.

Crisil has also foreseen a structural change in the financial services sector with companies going in for specialisation like in developed markets in the light of a changing scenario.

This is in line with the increasing emphasis on core competence, whereby instead of an entity engaging in all activities, it makes sense to focus on a few areas where it has a competitive edge, the release said.