Gold loan securitisation volume stands at Rs 4,400 cr in H1 FY22: Report

Gold loan securitisation volumes stood at around Rs 4,400 crore in the first half of the current fiscal, same as volumes seen in the year-ago period, Icra Ratings said in a report on Wednesday.

During the Covid-19 pandemic, gold loans have been considered to be a safer asset class given the availability of a liquid collateral and rising gold prices, it said.

"Gold loan securitisation volumes were about Rs 4,400 crore in H1 FY2022 (similar to volumes seen in H1 FY2021) forming 10 per cent of the overall domestic securitisation volumes as compared to 6 per cent seen in FY2020 (pre-Covid period), the credit rating agency said in the report.

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.

While direct assignment (DA) transactions have a dominant share, the share of PTCs in gold loan securitisation has been rising, the report said.

Investors like HNIs and mutual funds have shown a higher appetite in investing in gold loan PTCs as compared to other asset classes.

While gold loan securitisation had seen some slowdown post 2012 due to the removal of priority sector lending classification and introduction of minimum holding period (MHP) requirements for securitisation, the volumes have again picked up since FY2019, the agency's Vice President and Group Head (Structured Finance Ratings) Abhishek Dafria said.

Lower delinquencies, liquid collateral and affinity for borrowers towards gold jewellery have ensured healthy investor appetite for gold loan securitization, he said.

The low delinquencies in gold loans are also supported by the gold prices that have largely seen an upward trajectory in the last seven-year period.

The agency's Assistant Vice President and Sector Head Gaurav Mashalkar said Icra has rated 25 gold loan PTC transactions since June 2019 and the performance of these transactions has been healthy.

The credit rating agency expects the overall growth for gold loan NBFCs to remain robust in the near to medium term which would support healthy volumes of gold loan securitisation with its share in overall securitisation market being 8-10 per cent.