It may be noted that the securitization activity, in which a lender transfers its future receivables on loans to other financiers in exchange for a deduction, was hit hard during FY 2012 due to the devastating second wave of the coronavirus pandemic, which led to the loss of loans. Recovery was difficult.
Speaking about the growth in the first half of FY13, the agency’s deputy chief rating officer Krishnan Sitaraman said that despite several adverse conditions, the long track record of stable performance of securitized pools may have eased investor concerns. , but he said some investors still remained. apprehensive.
Sitaraman said, “… some deals remained unaffected due to the austerity of some investors for fresh investments, leading to a reduction of about 10 per cent from the segment’s potential growth.”
Mortgage-backed securitization loans remain the largest segment among asset classes, accounting for 40 percent of market volume, followed by commercial vehicle loans at 30 percent and microfinance loans at 13 percent.
Direct Assignment (DA) transactions, which include mortgageIt said gold and microfinance loans accounted for 62 per cent, adding that the share of pass-through certificates (PTCs) declined to 38 per cent from 44 per cent a year ago.
Private sector banks bought more than half of the loan assets, while public sector banks bought a quarter of the volume.
In the first, a PTC transaction involved loans generated by the NBFC under a co-lending framework with another large NBFC and the latter was secured.
The agency said the past few months have seen some “unorthodox practices” in securitization activity, such as non-mortgage transactions, offering flexible rates on their liability instruments, to accommodate investor expectations.
About a fifth of PTC transactions in the past three months – an unprecedented high – had a turbo-acceleration provision, which limits or restricts outflows from the pool to the parent entity until the investor is fully paid, it said.
The agency said banks and NBFCs alike have reached arrangements under new loan formats such as co-lending, but unless players are accustomed to these new formats, its impact on securitization will not be there in the near term.