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Securitisation Volume Soars In The First Half Of FY19 Driven By Bank Purchases

The volume of securitisation transactions nearly doubled in the first half of the fiscal year, shows data released by rating agency CRISIL. The surge, which was driven by bank purchases of loan portfolios, is expected to continue in the second half with large lenders like State Bank of India stepping up the pace of such transactions.

The increase in securitisation transactions helps the financial system at a time when non-bank lenders are facing tight liquidity conditions and banks have turned risk-averse.

According to CRISIL data, securitisation volume jumped by 95 percent year-on-year to Rs 67,700 crore in the April-September 2018 period. The increase was led by banks purchasing loans portfolios from Non-Banking Finance Companies and Housing Finance Companies.

Direct assignment, or the direct purchase of loan receivables, doubled to Rs 42,700 crore, showed the data. Banks preferred to purchase mortgage backed loans, accounting for 74 percent of the DA volume and 46 percent of the overall volume.

Securitisation via Pass-Through-Certificates rose 61 percent year-on-year to Rs 25,000 crore in the fiscal year-to-date, helped by resilient demand for priority sector lending assets.

Direct purchases benefit from a more favorable treatment under the Ind-AS accounting rules. The trend is likely to further skew the market in favour of DAs as investors are seeking higher yields on PTCs, said Krishnan Sitaraman, Senior Director at CRISIL Ratings in a release.

Securitisation Volume Soars In The First Half Of FY19 Driven By Bank Purchases

Most of the securitisation transactions continued to be driven by mortgages, vehicle loans and microfinance loan portfolios. Mortgage-backed loans accounted for 74 percent of DA volume and 46 percent to total securitisation volume.

Priority Sector Lending Certificates are also growing in popularity, noted the CRISIL report. Volumes in this segment touched Rs 1.77 lakh crore first half of the current fiscal year, twice as much as volume recorded last year in the same period.

CRISIL expects securitisation volumes to remain high in the second half of the year. Narrowing access to conventional forms of funding for non-banks and increasing comfort among banks to buy portfolios from non-banks could lead the growth, said the rating agency.

Recently, SBI announced it could purchase upto Rs 45,000 crore of securitised assets this fiscal compared to its earlier estimate of Rs 15,000 crore.

Securitisation Volume Soars In The First Half Of FY19 Driven By Bank Purchases

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