Securitisation Volumes Jump To Rs 50,300 Crore In April-June Quarter: ICRA Report

Securitisation of loans grew by 56 percent year-on-year to Rs 50,300 crore during the quarter ended June 2019.

With tight liquidity conditions and funding constraints throughout the course of financial year 2018-19, non-banking finance companies and housing finance companies resorted to selling down their retail loan portfolios to banks in order to raise funds.

In total, Rs 1.99 lakh crore worth of loans were sold by NBFCs and HFCs to banks in FY19, compared to Rs 85,000 crore in FY18.

While Rs 50,300 crore worth of loans were securitised in the first quarter of FY20, around Rs 32,300 crore worth of loans were sold in the year-ago period, according to a report by ICRA Ratings Ltd.

Direct assignment transactions rose 35 percent on a yearly basis to Rs 28,300 crore as of quarter ended June. Pass through certificate transactions, however, grew 95 percent to Rs 22,000 crore in the same period.

Vibhor Mittal, group head for structured finance ratings at ICRA Ratings, said non-bank lenders and HFCs continue to rely heavily on securitisation as a tool for raising funds and manage liquidity, while other on-balance sheet funding avenues from banks and capital markets remain limited for most entities.

Banks, particularly public sector banks, remain the largest investors in securitisation transactions as they acquire both priority-sector and non priority-sector retail loans, he said.

Under the direct assignment route, mortgages—including home loans and loans against property—constitute around 46 percent of the total transactions. This works out to Rs 13,018 crore worth of mortgages being sold in the first quarter.

Micro loans constituted 20 percent of all DA transactions followed by vehicle loans constituting around 17 percent of all DA securitisation volumes.

On the other hand, pass through certificate transactions witnessed widespread participation from various issuer and investor segments. The number of issuers under the PTC route jumped to 34 as of June 2019 from 27 in June 2018, ICRA said.

Despite more issues, the top five issuers have a market share of 71 percent in the overall PTC volumes.

Vehicle loans constitute around 51 percent or Rs 11,200 crore worth of PTC securitisation volumes, followed by mortgages with a 20 percent share.

Other loans, such as cash loans, consumer durable loans, two-wheeler loans, gold loans and term loans account for 14 percent or Rs 3,080 crore of all PTC transactions in the June quarter.

The share of micro loans being sold through the PTC route has come down from 23 percent or Rs 2,599 crore in Q1 FY19 to 4 percent or Rs 880 crore at the end of June quarter.