Covid-19 Resurgence May Impact Securitisation : Crisil

Securitisations volumes in the near term could be impacted by rising Covid-19 cases and the resultant restrictions being imposed in a number of states, said ratings agency Crisil.

"Many NBFCs may be compelled to refocus their energies on collections, and fresh disbursements could take a back seat. Containment measures, including a temporary suspension of movement and business activities, could inhibit borrower cash flows," it said.

"If these impact collection efficiencies, they may again deflate returning investor confidence and inhibit securitisation volumes in the near term."

However, Crisil pointed out that securitisation transactions surged in Q4FY21 to Rs 40,000 crore but were still below pre-Covid levels.

Notably, Q4 of fiscal 2021 witnessed securitisation transactions amounting to Rs 40,000 crore to become the highest grossing quarter for the fiscal.

"Despite this last quarter surge, securitisation volumes closed below the psychological Rs 1 lakh crore mark last fiscal, down from Rs 1.9 lakh crore clocked in each of the previous two fiscals," Crisil said.

"The securitisation market had started to open up last fiscal as containment restrictions were withdrawn, commercial activity resumed and the moratorium period announced by Reserve Bank of India drew to a close in August 2020."

As a result, deals comprising nearly three-fourths of annual volume were executed in the second half of the fiscal.

Further, as business activity picked up and borrowers resumed repayments, investors drew comfort from rising collection efficiency in securitised pools.

Besides, non-banking financial companies (NBFCs)resumed disbursements and raised funds through securitisation to fund incremental needs.

"Over 100 entities securitised assets during the fiscal, with more than 15 entering the market for the first time.

"Private and public sector banks invested in more than two-thirds of securitisation issuances, while foreign banks invested in 10 per cent. Mutual funds, insurance companies, NBFCs, and high-networth individuals (HNIs) accounted for bulk of the rest."

In addition, Crisil said that asset-backed securitisation (ABS) deals accounted for nearly two-thirds of securitised volumes.

Mortgage-backed securitisation (MBS) issuances, with underlying home loans and loans against property, comprised the remaining, it said.