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Credit growth of non-banks could lift transaction volume to near pre-pandemic highs this fiscal

Securitisation volume surged nearly 70% to Rs ~35,000 crore in the first quarter this fiscal on-year, primarily because of increased economic activity. Further, the base effect caused by low volumes last fiscal due to second wave of the pandemic also played a part. Q1 volumes this fiscal even surpassed that seen in fiscal 2019 but remained lower than that witnessed in fiscal 2020.

In fact, volumes in the first quarter could have been even higher but for the rising inflation and higher interest rates that have spawned caution over the repayment ability of borrowers, and divergent yield expectations among originators and investors. Consequently, despite the apparent return of enthusiasm among participants, a number of deals fell through at the quarter-end. Still, negligible disruption in collections and stable pool performance supported uptick in volume.

Mortgage-backed securitisation (MBS) loans comprised ~45% of quarterly volume (see Chart 1 in annexure) compared with 53% in the corresponding period of the previous fiscal. Asset backed securitisation (ABS) comprised the balance.

Says Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings, “More than 80 non-bank entities being present in the market in the first quarter, up from ~50 last fiscal, indicates strong comfort originators have with the securitisation process. Market activity in the past quarter also reflected the diversity of various asset classes across secured and unsecured loan categories.”

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