Rating Agency Analyzes Its Overall Rated Retail portfolio of SRs issued by ARCs over 2012-2022. The portfolio comprises of SRs of Rs 5,500 crore, backed by an underlying debt of Rs 11,500 crore as on September 30, 2022.
In the first nine months of 2022, the agency’s rated portfolio accounted for 68% of issuances in non-mortgage asset classes dominated by vehicle pools (43%) and personal loan (18%) pools, compared to 46% during 2021.
Home Loan and Loan Against Property Which was 54% of the portfolio in 2021, has come down to 32% in 2022.
The rating agency said distress among retail borrowers has led to a rise in non-performing loans (NPLs) of the banking sector since the outbreak of the COVID-19 pandemic, which has led to an increase in the retail NPL portfolio of ARCs. The agency considers this in line with an increase in issuance volume across asset classes in its rated portfolio. Ind-Ra ARCs are offering higher SR value for recent vintage issuances, mortgage portfolio is still outperforming under retail segment.
“Emerging Demand in the retail space with ARC National Asset Reconstruction Company Limited is now being set up as a special purpose arch…the analysis of Ind-Ra shows that the weighted average SR acquisition The rating agency said that the pricing for the mortgage pool is in the range of 50%-70% in the recent rounds, as against 25%-35% in the earlier rounds.
SRs backed by mortgage loans have achieved the highest average cumulative recoveries in the range of 90%-100% of the outstanding principal, while recoveries of non-mortgage loan trusts vary in the range of 20%-40% of the outstanding principal and have been and dependent on the underlying pool of asset classes.
The rating agency expects digitization and technology to play a key role in acquisition and recovery performance, especially in the unsecured asset class with smaller ticket loans spread across geographies. With increased and improved digital capabilities, ARCs can optimize and reduce their fixed costs and serve the portfolio in a very efficient manner.