Rating agency ICRA has said the market for structured finance products in the country has declined by 18 per cent to Rs 52,000 crore in 2008-09.
ICRA has estimated that the overall issuance declined by 18 per cent in value terms and 30 per cent in terms of number of transactions over the previous fiscal.
"Securitizations (including rated bilateral assignments) of retail assets [both asset backed securitizations (ABS) and residential mortgage backed securitizations (RMBS)] together saw a 47 per cent decline in volume," the rating agency said in a statement.
According to ICRA, until the first half of 2008-09, the Indian structured finance market was not severely impacted by the global credit crisis, largely because of the absence of transactions involving complex derivatives, revolving structures, and credit default swaps.
"But the tight liquidity conditions during the third quarter of FY2009 led to significant redemption pressure by mutual funds," ICRA Vice-Chairman and Group CEO P K Choudhury said.
"The situation was exemplified by the relative illiquidity and lack of market depth for structured finance papers. This, along with rising concern over the underlying credit quality, caused investor interest in structured paper to decline," he said.
ICRA with a positive outlook said volumes of structured financial products would experience a modest growth given the fact that securitization and loan pool assignment continue to be important funding tools for many original lenders.
The phenomenon, however, is expected to materialise more towards the second half of the current financial year.
Besides, regulatory factors such as targets (for banks) for priority sector lending would also continue to drive trading in certain loan assets. Also, the availability of funds with MFs the key investor segment would be a critical factor influencing deal flow.
ICRA also expects the final judgement of the Supreme Court on the matter of assignment of loans by banks may have a crucial bearing on securitization volumes in India.
