A healthy pickup in credit demand could almost boost the amount of securitization being generated by non-banking financial companies and housing finance companies at large. 33,000 crore in Q1 FY2023, according to rating agency Icra.
Shows a jump of 1.9 times compared to growth 17,200 crore securitized assets in Q1 FY2022 and an increase of 4.4 times over 7,500 crore in Q1 FY2021. Icra said in a report that the key reason for good sales in the first quarter of the current year is overall macroeconomic stability with no major disruptions, resulting in strong credit growth for NBFCs and HFCs on a year-on-year basis.
In contrast to this growth, in the last two years, the first quarter of each year was hit by the Covid-19 pandemic, resulting in a slowdown in economic activity due to lockdowns and reduced demand for credit.
“Securitization volumes seen in Q1 FY2023 were almost double the volumes seen in Q1FY2022. With the rise in credit demand, disbursements to NBFCs and HFCs have picked up in Q4 FY2022 and remain encouraging in Q1 FY2023, resulting in higher funding requirements which are partly met through securitization of their retail loans . Securitization is an important tool for these companies which will help them to diversify their funding instruments and broaden their investor base,” said Abhishek Dufria, Vice President and Group Head – Structured Finance Ratings.
Stable accumulation across all asset classes has boosted investor confidence and brought them back to the securitization market. “Collection capacity has been healthy over the past 5-6 months with the ICRA-rated pool showing 97-101% collections in April 2022, a month when collection efforts are generally low. If there are no epidemiological disruptions, So we expect the securitization volume to exceed 1.5 lakh crore in FY2023 as against Rs. 1.3 lakh crore in FY2022,” he said.
Securitization of mortgage-backed loans dominates with a 46 share of the total securitization volumes, followed by the vehicle loan segment at 26% and microfinance at 11%. The number of promoters who secured their assets in Q1 FY2023 sharply increased from 46 in Q1 FY2022 to 70.