Securitisation volumes expected to bounce back in FY22: ICRA
Dec 28, 2020
New Delhi [India], December 28 : The quarterly securitisation volumes will continue to strengthen for rest of the current financial year and remain robust in FY2022, investment information agency ICRA said on Monday.
After a sharp fall in Q1 FY2021, the volumes more than doubled in Q2 due to three main factors.
One: growing investor confidence in asset quality due to improving collections. Two: higher funding requirement of originators on account of increasing disbursements. And three: improving business activities post the end of lockdown and moratorium period.
Even though the collections may not have reached the pre-COVID levels, credit enhancement available in transactions has further built-up owing to amortisation of pools supporting their credit quality.
Resumption of businesses, as the lockdown was gradually eased, will also support the ability of retail borrowers to meet their EMI payments.
ICRA said it expects collection efficiency across asset classes to further improve and remain robust in FY2022, notwithstanding any prolonged period of economic slowdown that could have a bearing on the ability of the borrowers to sustain their EMI repayments.
As of November payout, ICRA observed only 4 per cent of its rated transactions where more than 10 per cent of the credit collateral has been utilised.
Given sequential improvement in collections post the moratorium, the possibility of material utilisation of credit collateral in future remains low.
"A sharp revival is expected in disbursements by non-banking companies and housing finance companies which in turn will support the securitisation market to meet the additional financing requirements," said ICRA.
Banks (public and private) have been the major investors in securitisation transactions in India. ICRA expects priority sector lending (PSL) requirement of these banks to remain a key driver for the securitisation market.
