The securitisation market witnessed an increased activity in the fourth quarter of the financial year 2021-22 with the value of such transactions rising to ₹1.35-lakh crore as against ₹90,000 crore in the previous fiscal, Crisil Ratings said in a report.

Although the securitisation value increased in the previous fiscal, it remained below the pre-pandemic levels. In the fiscals 2019 and 2020, the transaction values were at around ₹1.9-lakh crore. "The cumulative value of loan assets securitised last fiscal rose to ₹1.35-lakh crore, a good 50 per cent higher compared with around ₹90,000 crore in fiscal 2021," the report said on Wednesday.

Securitisation involves transactions where credit risks in assets are redistributed by repackaging them into tradable securities with different risk profiles. It may give investors of various classes an access to exposures which they otherwise might be unable to access directly.

‘A raft of tailwinds’

The rating agency said a raft of tailwinds propped the securitisation volume. Most non-banking financial companies (NBFCs) reported an upturn in business activity, which led to improved borrower cash flows and collection efficiencies.

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Disbursements also picked up, necessitating incremental funding requirements. More than 130 financing entities securitised their assets in the past 12 months. Investors such as mutual funds and foreign-owned financing entities which were chary in the recent past picked up such securitised instruments, the report said.

The agency's Senior Director and Deputy Chief Ratings Officer Krishnan Sitaraman said the upturn in business activity, stable collection ratios, increasing disbursements, more entities securitising assets and the return of investors such as mutual funds are indicative of the economy rebounding.

Q4 data

"Based on fourth-quarter data, it would be safe to surmise that India's securitisation market is coming out of the pandemic-induced stupor," Sitaraman said. The last quarter of fiscal 2022 also saw a number of mortgage-backed deals comprising pools of non-retail loans with higher ticket sizes. The conventional retail mortgage-backed securitisation segment accounted for 40 per cent of the overall volume, the report said.

The proportion of pass-through certificate issuances rose from 37 per cent in FY21 to 38 per cent in FY22, while the direct assignment route continued to record higher volumes, accounting for as much as 62 per cent of the retail assets securitised. Nearly four-fifths of the investments were by public and private sector banks, with NBFCs also playing a role in acquiring assets from other finance firms, the report added.

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