“Gold loan securitization volumes stood at around Rs 4,400 crore in H1 FY2022 (similar to volumes seen in H1 FY2021) accounting for 10 per cent of total domestic securitization volumes as compared to 6 per cent seen in FY 2020 (pre-covid period).” The credit rating agency said in the report.
Securitization involves transactions where the credit risks in assets are redistributed into tradable securities with different risk profiles. It can give different classes of investors access to exposure that they may otherwise be unable to access directly.
The report said that while Direct Assignment (DA) transactions have a major share, PTC’s share in gold loan securitization is increasing.
Investors like HNIs and Mutual Funds have shown more interest in investing in Gold Loan PTC as compared to other asset classes.
The agency’s Vice President and Group Head said, “While some slowdown was observed in securitization of gold loans after 2012 due to removal of priority sector loan classification and introduction of Minimum Holding Period (MHP) requirements for securitization, but The volumes have increased again since FY19.” (Structured Finance Ratings) Abhishek Dafria said.
He said that low delinquency, liquid collateral and affinity towards borrowers towards gold jewelery have ensured healthy investor appetite for gold loan securitization.
Lower defaults in gold loans are also supported by gold prices, which have seen a massive upward trajectory over the past seven years.
Gaurav Mashalkar, Assistant Vice President and Sector Head of the agency said that ICRA has evaluated 25 gold loan PTC transactions since June 2019 and the performance of these transactions has been healthy.
Credit rating agency expects overall growth of gold loans NBFC To remain strong in the near to medium term which will be supported by healthy volume of gold debt securitization with a share of 8-10 per cent in the overall securitization market.