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India Ratings and Research (Ind-Ra) in its latest report has said that it witnessed a continuous recovery in the average current collection efficiency to 80 percent in August 2021 from 79 percent in July 2021 across its 143 rated securitisation transactions. It noted that there has been a 10 percentage point increase in the collection efficiency since May 2021 for all the outstanding transactions, after reducing by 13.4 percentage points from March-May 2021. 

The agency said there is likely to have been a further improvement in September 2021 collections. Securitisation involves transactions where credit risks in assets are redistributed by repackaging them into tradable securities with different risk profiles. It may give investors of various classes an access to exposures which they otherwise might be unable to access directly. It said there is an improvement in the current collections across asset classes, except in unsecured business loans and tractor loans.

With the festive season, the agency expects demand to pick-up, not only for the non-discretionary sector, but also for discretionary products. It noted that this will allow small businesses to perform better. It also said that the rural area impacted substantially from the second Covid-19 wave, there is still a downward pressure on collections for its rated tractor loan transactions. It added that prospects for the agricultural sector and rural demand looks promising, which could help borrowers in the near term.