Slowdown in loan growth takes securitisation to all-time high of Rs 1 lakh crore

Key Highlights: 

• Securitisation transaction stood at Rs 102,500 crore in FY17
• Pass-through certificates and  mortgage-backed securities best performer
• Bank's outstanding credit growth reached at Rs 78.81 lakh crore in FY17

Securitisation transactions in India touched a lifetime high of Rs 1,02,500 crore in fiscal 2016 – 17 (FY17), rising 47% as against last year.

Securitisation is a portal where a company clubs its different financial assets/debts to form a consolidated financial instrument which is issued to investors. 

Krishnan Sitaraman, Senior Director, Crisil Rating, said, “Tax clarity gave a big fillip to the securitisation market. The shift back to PTCs augurs well for healthy development of the market due to protection for investors against potential pool delinquencies through credit enhancement coupled with regular monitoring and greater transparency in pool performance.”

Performance of pass-through certificates (PTC) touched a decadal high of Rs 42,800 crore in FY17, a growth of whopping 74% as against Rs 24,500 crore in the previous fiscal (FY16). Meantime, direct assignments (DA) reported a single-digit growth of 6.8% to Rs 47,700 crore versus same previous fiscal.

Growth in PTC securitisation was largely driven by private sector banks (including foreign ones), who prefer it over alternative DA route - because of higher regulatory due-diligence and also because absence of credit enhancement in DA, as per Crisil.

For DA's performance, Crisil said, “With bank credit growth tottering in single digits, banks focused on the DA route. So much so, 21% of incremental retail credit growth for fiscal 2017 was through DAs.”

PTC and DA volume growth saw rise across asset classes barring microfinance, where volumes shrunk marginally.

Mortgage-backed securities (MBS) remained the largest asset class in securitisation, growing 39% and raking up transactions worth Rs 41,000 crore. 

Transactions in asset-backed securities (ABS) grew 24% to Rs 49,600 crore, largely driven by vehicle loans. 

However, microfinance sector remained under stress because of demonetisation-related impact and local socio-political issues, which continue to impact collections. 

Volume of microfinance receivables securitised fell by Rs 1,900 crore in the fourth quarter as compared to Rs 8,700 crore during first nine months of fiscal 2017.

Divya Chandran K, Associate Director, CRISIL Ratings, said. “We expect NPSL securitisation to be a focus area this fiscal. We also see potential for banks to originate securitisation deals where corporate loans, infrastructure assets and trade receivables would be the underlying assets.”

In the financial year end on March 2017, bank's outstanding credit growth reached at Rs 78.81 lakh crore compared Rs 75.01 lakh crore as of April 2016. Thus, credit growth in 2017 stood at 5.08% lowest since 1953-54 when it had inched up by a paltry 1.7%. 

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