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ICRA Ratings in its latest report has said that the securitisation volumes in microfinance loans, which saw improvement in the first nine months of FY22, may witness some impact in the fourth quarter (Q4FY22) due to concerns around the third wave of COVID infections that may affect the repayment capabilities of the borrowers who have a marginal financial profile. In the first nine months of the current fiscal, there was a recovery in absolute terms with micro-loan securitisation volumes at around Rs 6,200 crore as compared to around Rs 1,900 crore in the year-ago period.

According to the report, microfinance entities would continue to see challenges in terms of raising funds through securitisation in the near term as investors remain wary of the performance of the borrowers given the unsecured nature of the loan. It said securitisation, which prior to the pandemic contributed between 30-40 per cent of the disbursements for NBFC-MFIs, has seen its share drop to sub-20 per cent post-pandemic with fewer entities able to tap the securitisation market.

The report further said share of microloan securitisation in overall securitisation has also declined from a peak share of 15 per cent in FY2020 to 10 per cent in FY2021 and around 8 per cent in nine months of FY2022. It said the collection efficiency seen in its rated micro-loan pools witnessed a decline during the moratorium period (April to August 2020) and again in Q1 FY2022 due to the second wave. However, it said the collections witnessed a healthy bounce back in the subsequent period, displaying the borrower resilience.