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Credit rating agency ICRA, on Monday, said domestic securitisation market volumes touched an all-time high of ₹1.44 lakh crore (monthly run-rate of ₹16,000 crore) during the nine-month period (April-December) of FY2019, compared to market volumes of ₹84,000 crore (monthly run-rate of ₹7,000 crore) for the entire fiscal 2018.
Fund-raising
These volumes have come on the back of non-banking finance companies (NBFCs) and housing finance companies (HFCs), which were facing liquidity issues following the IL&FS imbroglio, raising around ₹73,000 crore in the third quarter (Q3 FY2019) through sell-down of their retail and small and medium enterprise (SME) loan portfolios to various investors (mainly banks).
The total domestic securitisation market volume was ₹78,000 crore in Q3 FY2019.
Vibhor Mittal, Group Head, Structured Finance Ratings, ICRA, said: “Funds raised by NBFCs and HFCs through the securitisation route helped meet sizeable repayment obligations of the sector in an otherwise difficult market.
“Investor appetite, particularly from public sector and private banks, is high in present times, considering that the investors are not exposed to entity level credit risk, and are seen taking exposure to the underlying pool of retail and SME borrowers (to whom the seller entities have lent).”
Securitisation volumes were boosted further by the RBI’s relaxation of the minimum holding period (MHP) criteria for long-tenure loans, which increased the quantum of assets eligible for securitisation in the system, he added.
Liquidity position
While the liquidity position for NBFCs and HFCs has started easing, the agency, in a statement, said the momentum in the securitisation market is likely to remain strong in the last quarter of the current fiscal.
Mittal observed that the securitisation market in India has become more broad-based with the introduction of many new asset classes such as lease rentals, consumer durable loans, cash loans, and education loans.
“Participation from non-PSL-focussed investor segments such as mutual funds, insurance companies, NBFCs and FPIs (foreign portfolio investors) has also picked up to some extent.
“Securitisation would remain an important funding tool for retail-focussed NBFCs as it provides funding at an attractive cost, while simultaneously achieving a well-matched ALM position (asset-liability management).”
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