There has been a sharp fall in securitisation of corporate loans in the last one year. In contrast, the volume of retail loans that were securitised almost doubled in the period.
Factors like lower borrowings in sectors such as telecom and oil companies and reduced investor appetite in some sectors like non-banking finance companies and real estate led to the fall in corporate loan securitisations. The retail market was driven by transactions in mortgage-backed securitisation (MBS), comprising mainly home loans.
The volume of corporate loan securitisation in April-September this financial year was close to Rs 9,000 crore, as against Rs 32,000 crore in April-September last financial year, data from credit rating agency Icra showed.
On the other hand, the volume of retail loan securitisation in April-September 2009-10 was Rs 8,700 crore, as against Rs 4,800 crore in April-September, 2008-09.
“A significant part of corporate loans that were securitised in the first half of last year were to NBFCs, oil public sector units, real estate companies and telecom entities. In the current year, for reasons of their own, the borrowing needs of this set of borrowers were lower. Secondly, investor appetite for some sectors, mainly NBFCs and real estate, reduced, mostly arising out of the experience of October-November 08,” said Kalpesh Gada, head, structured finance products, ICRA.
Last year, the share of the telecom sector in the corporate loan securitisation market was the highest at 24 per cent, followed by oil (23 per cent), NBFC (20 per cent) and real estate (10 per cent).
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The recent Reserve Bank of India (RBI) move to tighten securitisation norms is likely to further impact the volumes. RBI had specified a lock-in of one year for securitisation products. It has asked the originators to retain at least 10 per cent of the pool of assets being securitised.
The guidelines are likely to impact the corporate securitisation market more than the retail as the retention period in the later is higher.
The market for corporate loans started drying up in the second half of the last financial year as around 92 per cent of the total loan selloffs (involving about 202 transactions worth Rs 32,000 crore) in the corporate sector were made in the first half of last year, according to the Icra report. In the second half, merely 21 transactions, involving just Rs 3,000 crore, were executed.
Another reason for the slowdown in the corporate loan securitisation market in the second half of last year was decline in fresh offerings of fixed maturity plans by mutual funds as selling loans was a good investment option for them, according to the Icra report.
On the retail side, the securatisation market has seen a shift from asset-backed secularisation (ABS) to mortgage backed securitisation (MBS).
“The growth in retail loan securitisation year-on-year has been primarily driven by some mortgage-backed securatisation transactions that happened between HDFC and HDFC Bank as a part of an ongoing internal arrangement. I won’t say this truly reflects the market trend,” said Gada.
While the split between ABS and MBS in H1-09 was in the ratio of about about 95:5, this figure was 65:35 in in H1-FY10.
MBS relates to pools of retail loans given for acquiring homes or loans against existing homes (loan against property or home equity loans). ABS covers all other retail loans (mainly car loans, truck loans, construction equipment loans, unsecured personal loans, loans against gold, etc).