Securitised pools face pressure as collections dip on unsecured loans

The securitised asset pool has come under pressure due to falling collections in collateral free credit segments, such as personal, microfinance and small business loans, over the last few months, rating agency ICRA said on Thursday.

 

The collections of microfinance pools have declined to about 90 per cent in the third quarter of financial year 2025 (Q3FY25) from around 97 per cent at the beginning of this year.

 

Collection efficiency in the unsecured SME and personal loan segment has also moderated in the ongoing financial year, ICRA said. It flagged the slowdown in economic activities, coupled with overleveraging of borrowers, as a cause for concern.

 

Rating agency in a statement said its rated pools for secured asset classes have shown healthy performance. The collection efficiencies for such securitised loans ranged from 91 per cent to 104 per cent in first nine months of FY25, aided by rigorous efforts, and adoption of digitised processes.

 

ICRA-rated securitised loan pools i.e. pass-through certificates (PTCs) continue to have adequate credit enhancement to protect against the drop in collection efficiency. 

 

The collections of the microfinance pools have remained under pressure, though green shoots are visible as microfinance lenders have reported better collections, especially from the non-delinquent contracts, from December 2024 onwards.

 

The micro finance institutions (MFIs) may again witness a period of stress in Q1FY26 as more stringent guardrails are proposed from April 2025. The stringent norms will lead to entities cutting down on disbursements, thereby elevating the risk of non-payment by highly leveraged borrowers, ICRA added.

 

For vehicle loan pools, there has been a marginal decrease in the collection efficiency in Q3 FY25.

 

Housing loans and loans against property pools have showcased steady collections in FY25 due to the critical nature of the underlying collateral for the borrowers and advances in online collection methods.