Securitisation volume may reach Rs 1 trillion this yr: Crisil

Securitisation volume in the first six months of 2016-17 year increased to Rs 45,000 crore and is likely to reach close to all-time high of Rs 1 lakh crore by the end of the fiscal, says a report.
During the first quarter of this fiscal, securitisation volume was estimated at around Rs 17,000 crore while it was about Rs 28,000 crore in the second quarter.
"We expect issuance volume for the current fiscal to edge closer to an all-time high of Rs 1 trillion, given the sharper focus of both public and private sector banks on growing their retail books, the incremental priority-sector lending (PSL) targets set for foreign banks, and a widening of the investor base following greater clarity on dividend distribution tax," Crisil's senior director Krishnan Sitaraman said.

Securitisation is pooling in various types of contractual debt obligations and selling their related cash flows to third party investors as securities.
Pass-through certificate (PTC) transactions have rebounded strongly, totting up to Rs 22,500 crore for the first half, nearly trebling from the near Rs 7,500 crore logged in the first quarter.
PTC transactions had dropped sharply following the imposition of distribution tax through Finance Act, 2013, and investor preference for the direct assignment route. However, Budget 2016 scrapped the tax and this has had a positive impact already.

Vehicle loans - commercial vehicles and cars - comprised around 52 per cent of the demand for PTC deals, microfinance 26 per cent, and housing loans and loans against property 12 per cent, with asset classes, such as construction equipment, micro, small and medium enterprises (MSME) loans and tractor loans bringing up the rest.

The second quarter saw the return of mutual funds and bank treasuries to the market, with investments in PTCs backed by car and commercial vehicle loans, which were non-priority sector.
The tenures of these asset classes aligned well with the investment strategies of mutual funds.
A few bank treasuries have also invested in these PTCs with the intent of selling down in future - given the outlook for a softer interest rate environment.
The Budget permitted foreign portfolio investors to invest in PTCs.
The ratings agency believes the entry of such large institutional investors with long-term funds augurs well for growth and development of the country's securitisation market.