Securitisation Volume At All-Time High Of Rs 1.44 Trillion In April-December
A HDFC Bank Ltd. teller counts Indian 100 rupee banknotes at the company’s bank branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Securitisation Volume At All-Time High Of Rs 1.44 Trillion In April-December


The securitisation market volume in the country touched a life-time high of Rs 1.44 trillion in the nine months of the current financial year, with around Rs 78,000 crore generated in the third quarter, says a report.

The securitisation market remained buoyant in the third quarter driven by the prevailing liquidity crisis, following defaults by Infrastructure Leasing & Financial Services and its subsidiaries.

"Domestic securitisation market volumes have touched an all-time high of Rs 1.44 lakh crore during the period April-December as compared to market volumes of Rs 84,000 crore for the entire fiscal 2018," according to a report by domestic rating agency ICRA.

Of this, around Rs 73,000 crore was raised by non-bank financial companies and housing finance companies through sell-down of their retail and SME loan portfolio to various investors.

"Funds raised by NBFCs and housing finance companies through the securitisation route helped meet sizeable repayment obligations of the sector in an otherwise difficult market," said Vibhor Mittal, group head, structured finance ratings at ICRA said.

Investor appetite, particularly from public secto rbanks and private banks, is high at present, considering investors are not exposed to entity level credit risk, and are seen taking exposure to the underlying pool of retail and SME borrowers.

The securitisation market in the country can be segregated into two types of transactions, rated Pass Through Certificate (PTC) transactions, and unrated Direct Assignment (DA) transactions.

The direct assignment transactions volume soared Rs 94,000 crore in the first nine months of financial year 2018-19, with Rs 53,000 crore in the third quarter. PTC transaction volumes also surged to Rs 25,000 crore in the third quarter and stood at Rs 50,000 crore in April-December period.

Securitisation volumes were further boosted by the Reserve Bank of India’s relaxation of the minimum holding period criteria for long-tenure loans, which increased the quantum of assets eligible for securitisation in the system.

The report said priority-sector lending requirements of banks have remained the driving force behind securitisation volumes.

However, in recent years, the share of non-PSL backed transactions is on the rise with increasing participation from mutual funds, insurance companies and NBFCs investor segments.

The rating agency further said while the liquidity position for NBFCs and housing finance companies has started easing, the momentum in the securitisation market is likely to remain strong in the last quarter of the current fiscal.

Also read: RBI Extends Enhanced Borrowing Limit For NBFCs Till March 31

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