Moody's Investors Service, a global rating agency, has upgraded the ratings assigned to the pass-through certificates (PTCs) of two ABS transactions backed by static pools of commercial vehicle loans and micro small- and medium-enterprise loans originated by AU Small Finance Bank Limited (AUSFB) in India. Moody's upgrade rating actions were prompted by a lowering of the operational risk related to the servicer, the increase in the available credit enhancement in the form of a reserve fund benefiting the PTCs, and the good performance observed from the receivables relative to Moody's assumptions.
On the lower operational risk, Moody's says that this situation is due to the improved credit profile of AUSFB as the servicer. Moody's points out that AUSFB's servicing of these securitized portfolios involves the collection of a portion of the loan payments in person and in cash from borrowers who are located across India. Consequently, AUSFB's improved credit profile reduces the likelihood — and therefore the risk — of servicer disruption arising from a potential default of AUSFB.