Securitisation volumes fell marginally to Rs 1.97 lakh crore for 2019-20 but are likely to be impacted in the new fiscal year because of the COVID-19 pandemic as investors turn cautious, a report said on Tuesday.
The total securitisation, wherein future receivables against a loan are cobbled together and sold to another entity by a financier, had doubled to Rs 1.99 lakh crore in 2018-19, largely because of liquidity issues faced by non-bank lenders, domestic rating agency Icra said.
"We expect the securitisation volumes to be negatively impacted in the current year, especially in H1 FY2021. The disruptions caused by COVID-19 pandemic may make investors cautious," the agency's head for structured finance Abhishek Dafria said.
He said in the last 18 months, non-bank finance companies and housing finance companies have raised Rs 3.4 lakh crore to partly overcome difficulties faced in raising funds on their own balance sheets.
Apart from the investors' caution, other factor which will make the market tepid in 2020-21 will be the muted loan growth on the retail front to be expected by the non-bank lenders, the agency said, hinting that there will not be much of need to create the liquidity for making new loans.
It said loan growth for the non-bank sector as a whole will slow down to 6-8 per cent in FY2021 as against the 10-13 per cent estimated to be achieved in FY2020.
On the other side, factors like the priority sector lending (PSL) targets of banks and necessity to grow the loan book through inorganic buyouts would continue to support the securitisation market, it said.
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NFBCs and HFCs could continue to face challenges in raising funds on their own balance sheets which may again lead to high reliance on selling pooled loan assets.
In FY2020, the pass through certificates transaction volumes were around Rs 77,000 crore as compared to around Rs 71,000 crore in the previous fiscal year.
Volumes for direct assignment transactions were around Rs 1,20,000 crore in FY20 as against around Rs 1,28,000 crore for FY2019, it said, explaining that DA transactions continue to have a higher proportion in sell-down market as PSU banks, which form the largest investor segment, prefer DAs over PTCs.
The agency's assistant vice president Sachin Joglekar said with the addition of asset classes such as gold, small business loans, two-wheelers and personal loans, the Indian securitisation market is now much more diverse and because of the same, the securitization market mainstay of mortgage loans is witnessing lower proportions now.