The securitisation volumes rose to around Rs 18,000 crore in October, driven by higher funding demand from non-banking financial companies (NBFCs) and housing finance companies (HFCs), according to a report.
Following default from Infrastructure Leasing and Financial Services (IL&FS), many NBFCs and HFCs are facing liquidity crisis and are raising funds through selling their retail portfolio to meet their repayment obligations.
"Securitisation volumes soared to around Rs 18,000 crore in the month of October alone, with many entities raising funds through retail portfolio sell-down to banks," rating agency Icra said in its report Tuesday.
In the first half of the current fiscal, the securitisation volumes were around Rs 66,300 crore, while it was around Rs 83,800 crore for the entire FY18.
In October, country's largest lender State Bank of India bought Rs 5,250 crore of portfolio of assets from NBFCs. The lender had said said it plans to buy assets worth Rs 45,000 crore from NBFCs to help tide over the liquidity crisis.
These funds helped meet the sizeable repayment obligations of the NBFC sector, which was around Rs 78,000 crore of commercial paper (CP) due for repayment in October, in an otherwise difficult market, the report said.
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Other funding avenues had dried up for the NBFC sector, with capital market investors becoming wary of taking incremental exposures to some entities and general freeze in the credit markets owing to tight liquidity, it said.
Priority sector lending (PSL) requirements of banks have remained the driving force behind securitisation volumes for the past several years, according to the report.
However, it added that in recent years, the share of non-PSL backed transactions is on the rise with increasing participation from mutual funds and NBFCs as investors.
The report said while the liquidity position seems to be easing, the momentum in the securitisation market is likely to remain strong in the remainder of this quarter as there are significant redemptions falling due in the months of November and December 2018 as well.
The securitisation market in the country can be segregated into two types of transactions rated pass through certificate (PTC) transactions, and unrated direct assignment (DA) transactions.