Securitization in FY22 rises 50% to ₹ 1.35 trillion: Crisil report
Although the value of securitization has increased in the previous financial year, it is still lower than the levels before the pandemic. In the 2019 and 2020 financial years, transaction values were approximately ₹ 1.9-trillion. “The cumulative value of securitized assets rose to ₹ 1.35-trillion in the last financial year, up 50 per cent from about ₹ 90,000 crore in the 2021 financial year,” the report said on Wednesday.
Securitization involves redistributing transactions by repackaging credit risks in assets into tradeable securities with different risk profiles. This can give different classes of investors access to exposures, otherwise they may not have direct access.
‘Tail Winds Raft’
The rating agency said the raft of tailwinds supported the securitization volume. Many non-banking financial companies (NBFCs) have reported progress in business operations, which has improved borrower cash flows and collection capabilities.
Payments also rallied, and funding requirements increased. More than 130 financing firms have secured their assets in the last 12 months. Investors such as mutual funds and foreign-owned financing entities have recently opted for such securities, the report said.
Krishnan Sitharaman, senior director and deputy chief ratings officer of the agency, said the progress in business operations, fixed returns ratios, rising payments, more firms securing assets and mutual funds indicate that the economy is recovering.
“Based on the fourth quarter data, it is safe to assume that India’s securitization market will emerge from epidemic-induced folly,” Sitharaman said. The last quarter of the 2022 financial year also saw a number of mortgage-based deals involving non-retail loans with higher ticket volumes. The traditional retail mortgage-based securitization segment accounts for 40 percent of total volume, the report said.
The pass-through certificate issuance ratio increased from 37% in FY21 to 38% in FY22, while the direct assignment route continued to record higher volumes, with 62% of retail assets secured. Nearly four-quarters of investments are made by public and private sector banks, and NBFCs also play a role in acquiring assets from other financial institutions.
April 14, 2022