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A domestic rating agency ICRA in its latest report has said that lockdowns to contain the spread of the third COVID wave hurt loan collections and new lending by non-banks, and will in turn impact securitization volumes. The overall volumes of securitization – where a non-bank lender passes on future receivables against loans or a bunch of loans to another entity for upfront cash – will come at Rs 1-1.1 lakh crore in FY22 as against the Rs 1.2 lakh estimated earlier.

The report said securitization volumes could thus be affected in the January-March quarter because the NBFCs (Non Bank Finance Companies) and HFCs (Housing Finance Companies) may curtail disbursements, especially to COVID-impacted sectors, and investors would prefer to wait for the threat to subside. It said some states have already started imposing restrictions though of a milder nature so far and added that the lockdowns not only impact the collection ability as staff members fall ill but also the income generating ability of the borrowers.

Rating agency further said in the event that the severity of the COVID infections grows and results in higher hospitalisation rates, the state governments may impose stringent lockdowns to control the spread of the virus and investors will also wait for the threat to subside. It said higher proportion of securitisation transactions are usually placed in March and thus it hopes the spread of the virus would be contained sooner.