Securitisation of assets by NBFCs and mortgage lenders surge 48% in the first half of the fiscal year

Securitisation of assets by non-banking finance companies and mortgage lenders surged as much as 48% in the first half of the fiscal year as they raised funds selling assets when credit markets turned risk averse.

The volume grew to Rs 1 lakh crore as both established and new originators flocked to the securitization market to raise resources profile in a challenging financing environment, rating company Crisil said in report.

Securitisation of gold loan receivables, personal loan receivables, two-wheeler loan receivables and lease rental receivables are now mainstream, with newer originators increasingly participating in such transactions.

The number of active originators was close to 100 in the first half of this fiscal, compared with around 70 in the year ago period.

Securitisation is a key financial tool to help banks meet their priority sector targets.

“Heading into the second half of the fiscal, the prospects of the market remain strong. Expansion of the originator base and mainstreaming of non-conventional asset classes augur well for the market,” Crisil Ratings, senior director Rohit Inamdar was quoted as saying in a statement. “A bigger boost, however, is expected from regulatory interventions.”

The volume of pass through certificates (PTCs), which remain the preferred route for asset backed transactions, rose 63% on-year. Consequently, the share of PTCs in total securitisation rose to 41% from 36% in fiscal 2019. Direct assignment volumes grew 39% on-year to Rs 59,000 crore.

Mortgage-backed securitization volume rose 16% on-year, which is impressive given that some HFCs that were large originators last fiscal had limited transactions during the second quarter of this fiscal because of muted or negative growth in assets under management. In effect, the entry of new originators and the hunt for alternate source of funding, drove volume, the rating firm said.

“The partial credit guarantee scheme launched by the Ministry of Finance is expected to further lift demand for securitisation from public sector banks. Many of these banks have already sanctioned loans under the scheme and disbursements are expected over the next few months,” said senior director Says Krishnan Sitaraman.

Securitisation is expected to continue to be a key funding avenue for non-banks this fiscal when there have been challenges faced in other sources of resource mobilisation.

The report said that growth in securitisation volume may not hamper the market for priority sector lending certificates (PSLCs). During the first half of the fiscal 2020, PSLC transaction volume hit Rs 2.72 lakh crore, 83% of the total volume in fiscal 2019. PSLCs relating to the small and marginal farmers segment continued to be in most demand, followed by general, micro enterprises and agricultural – in that order.