Securitisation market likely to cross Rs 2L cr by end of FY2020: Icra

Mumbai: With non-bank financial companies and housing finance players relying more on securitisation for raising funds, the volume in the market is likely to cross Rs 2 lakh crore in FY2020, says an Icra report.

The NBFC sector has been facing a liquidity crunch since September 2018 following a series of default by Infrastructure Leasing and Financial Services (IL&FS). "We expect that the size of the securitisation market would cross Rs 2 lakh crore for FY2020 which would be an all-time high," Icra vice president and head (structured finance ratings) Abhishek Dafria said in a report.

In the nine months ended December 31, 2019, non-banking finance companies (NBFCs) and housing finance companies (HFCs) together raised Rs 1.57 lakh crore through securitisation route compared to Rs 1.44 lakh crore in the year-ago period.

In the third quarter of FY20, the securitization volumes stood at Rs 47,000 crore. While the volumes in Q3 FY20 have been high, the market has faced some headwinds due to muted growth in the NBFCs' books, which reduces the eligible assets available for sale, he said.

The default on pools of an originator due to on-going bankruptcy proceedings against it may have made some investors cautious.

"The liquidity challenges being faced by the NBFCs and HFCs coupled with a push by the government through the extension of its partial credit guarantee (PCG) scheme as well as extension on relaxation of minimum holding period (MHP) criteria for NBFCs/HFCs for another six months to June 2020 would support the securitisation market," Dafria said.

The securitisation market can be segregated into three types of transactions rated pass through certificate (PTC) transactions, unrated direct assignment (DA) transactions (bilateral assignment of pool of retail loans from one entity to another) and rated DA transactions.