Securitisation market volume clips past $1.02 trillion in FY17

Mumbai: The securitisation market has hit a record high of USD 1.02 trillion in fiscal 2017, helped by a surge in volume of pass-through certificates (PTCs), according to an industry report.

The securitisation transactions surged 47 percent to go past the trillion dollar mark in fiscal 2017 despite two speed-breakers - demonetisation, and the advent of priority sector lending certificates (PSLCs).

"Volume of pass-through certificates (PTCs) has rocketed 74 percent to a decadal high of Rs 42,800 crore as compared with Rs 24,500 crore in fiscal 2016, driven by clarity on distribution tax and demand from private sector banks," according to the data collated by Crisil.

However, the volume of direct assignments (direct sale of loans by originators - mostly by non-banking finance companies- to banks) saw a flattish growth of 6.8 percent to Rs 47,700 crore.

A few large transactions in future-flow securitisation and commercial mortgage-backed securities- estimated at nearly Rs 12,000 crore - helped crank up the overall volume.

"Tax clarity gave a big fillip to the securitisation market. The shift back to PTCs augurs well for healthy development of the market due to protection for investors against potential pool delinquencies through credit enhancement coupled with regular monitoring and greater transparency in pool performance," says the report.

Non-banking finance companies focusing on vehicle finance, and small finance bank applicants benefited from the high demand for priority sector lending assets.

Demonetisation had a material, but temporary impact on volumes between November and January 2017 as investors turned risk averse in light of the drop in collection performance of non-housing asset classes, notes the report.

Securitisation volume fell to Rs 10,000 crore in the third quarter of fiscal 2017 from Rs 28,000 crore in the second quarter.

Deals in asset-backed securities (ABS) grew 24 percent to Rs 49,600 crore, largely driven by vehicle loans. Mortgage-backed securities (MBS) remained the largest asset class in securitisation, growing 39 percent and raking up transactions worth Rs 41,000 crore.