Lockdowns aimed at containing the spread of the third wave of Covid-19 have hurt loan collections and new loans from non-banks, and in turn will impact securitization volumes, a rating agency said on Tuesday. national.
Overall securitization volumes – when a non-bank lender transfers future receivables against loans or a group of loans to another entity for initial liquidity – will amount to Rs 1-1.1 lakh crore in FY22 against Rs 1 , 2 lakh estimated earlier, ICRA said in a report.
Securitization volumes could thus be impacted in the January-March quarter because NBFC (Non Bank Finance Companies) and HFC (Housing Finance Companies) could limit disbursements, particularly to sectors impacted by Covid-19, and investors would prefer wait for the threat to subside, the agency said.
Some states have already started imposing restrictions, although so far of a milder nature, said Abhishek Dafria, head of the ICRA group for structured finance, adding that the lockdowns were not only impacting capacity. collection because staff fell ill, but also on borrowers’ ability to generate income.
In the event that the severity of Covid-19 infections increases and results in higher hospitalization rates, state governments could impose strict containment measures to control the spread of the virus and investors will also wait for the threat to end. mitigates, he said.
“A higher proportion of securitization deals are usually placed in March and so we hope that the spread of the virus will be contained sooner,” Dafria noted.
According to him, a decrease in disbursements would also have an impact on the growth of the securitization market in fiscal year 23, he added.
Traditionally, securitization through Direct Assignment (DA) transactions (bilateral transfer of a retail loan pool from one entity to another) has accounted for about two-thirds of total volumes, with certificate transactions of passage (PTC) (the loans are sold to an SPV which issues the PTC) representing the balance.
Due to concerns over the disruptions linked to Covid-19, the preference for PTCs increased (45% share in third quarter volumes) as credit enhancements in these structures would be able to absorb more losses. higher than expected than those that could arise during the transaction, the agency said.
