This is second instance of downgrade in the span of 30 days for ICICI Bank. Last month, private sector bank's securitised car and personal loan pool worth over Rs 203 crore was revised downward from "AAA (so)" to "AA (so)" due to rising defaults on payments by borrowers.
Commenting on the downgrade, Crisil said the performance of the pool has been marked by a significantly higher-than-expected use of the cash collateral. The cash collateral is an arrangement (cushion) for making payments to those who have invested in securitised paper when the collections for borrowers show a drop.
The collections have been lower than expected in the 27 months following securitisation. Consequently, the credit cover available to the rated contribution series has reduced.
The revised credit opinions indicate a moderate degree of certainty regarding timely payment of financial obligations on the instruments. The securitised paper is backed by commercial vehicle loan receivables originated and serviced by ICICI Bank.
This pool was securitised in December 2005 and 27 months after securitisation, the pool has amortised by about 78 per cent. The credit collateral stipulated at the time of rating was Rs 6.8 crore, of which, around 79 per cent has been utilised. This level of utilisation is much higher than rating agency's expectations.
The delinquencies including repossession losses in the this loan pool are also high 8.6 per cent for 90 plus day norm.
