Crisil warns COVID crisis may hurt Securitisations volume

MUMBAI: Rating agency Crisil warned that the prevailed COVID crisis and subsequent restrictions in India may impact the Securitisations volumes in the near term.

"Many NBFCs may be compelled to refocus their energies on collections, and fresh disbursements could take a back seat. Containment measures, including a temporary suspension of movement and business activities, could inhibit borrower cash flows," it said.

"If these impact collection efficiencies, they may again deflate returning investor confidence and inhibit securitisation volumes in the near term," it added.

Crisil also pointed out that the securitisation market had started to open up last fiscal as containment restrictions were withdrawn, taking the Q4 of fiscal 2021 to Rs 40,000 crore making it the highest-grossing quarter for the fiscal.

"Despite this last quarter surge, securitisation volumes closed below the psychological Rs 1 lakh crore mark last fiscal, down from Rs 1.9 lakh crore clocked in each of the previous two fiscals," Crisil said.

"The securitisation market had started to open up last fiscal as containment restrictions were withdrawn, commercial activity resumed and the moratorium period announced by Reserve Bank of India drew to a close in August 2020."

In addition,non-banking financial companies (NBFCs) resumed disbursements and raised funds through securitisation to fund incremental needs.

"Over 100 entities securitised assets during the fiscal, with more than 15 entering the market for the first time.

"Private and public sector banks invested in more than two-thirds of securitisation issuances, while foreign banks invested in 10 per cent. Mutual funds, insurance companies, NBFCs, and high-net-worth individuals (HNIs) accounted for the bulk of the rest."

Looking ahead, weekend lockdowns and stringent restrictions may inhibit business activities and securitisation volumes in the near term, it added.