NBFCs, HFCs raise ₹2.36 trillion during October-September on liquidity squeeze: Icra

As per Icra estimates, the PTC transaction volumes were around  ₹92,000 crore in the past one year.

Mumbai: Non-banking financial companies (NBFCs) and housing finance companies (HFCs) have together raised 2.36 trillion between October 2018 and September 2019 through sell down of their loans, rating agency Icra said on Monday. This was following the liquidity squeeze that gripped the non-bank lenders in September last year.

These loan assets were sold under the securitisation and direct assignment route.

According to Icra, this unprecedented increase in sell-down volumes reflects the choking-up of traditional on-balance sheet borrowing channels such as loans, bonds and commercial paper issuances. The domestic securitisation market, Icra said, is expected to remain robust and FY20 is expected to be another good year in terms of issuance volumes.

Abhishek Dafria, vice-president and head – structured finance ratings at Icra said NBFCs and HFCs continue to rely heavily on securitisation as a tool for raising funds, manage liquidity and correct any asset liability management (ALM) mismatch.

In addition, the partial credit guarantee scheme (PCG) of the government will also add bulk to the overall market volumes, said Dafria.

“With the public sector banks directed to disburse funding of 1 trillion under the PCG scheme by February 2020, we believe that the size of the securitisation market would be at an all-time high, in excess of 2 lakh crore for FY20,” said Dafria.

The sell-down market in India can be segregated into two types of transactions – rated pass-through certificate (PTC) transactions, and unrated direct assignment (DA) transactions or bilateral assignment of pool of retail loans from one entity to another.

As per Icra estimates, the PTC transaction volumes were around 92,000 crore in the past one year (October 2018 to September 2019), while volumes for DA transactions have been much higher at 1.45 trillion over the same period.

“Icra has observed that there has been a reduction in PSL (priority sector lending)-driven transactions in the PTC space. The share of PSL PTC transactions has slowly reduced over the past three to four fiscal years and stood at 52% for first half of FY20 compared to 88% in FY17,” the rating agency said.

This reduction, it said, can be majorly attributed to a change in the investor base in PTC transactions.

“Private banks were the major investor category for PTC transactions and their need for acquiring PSL assets drove their appetite. However, in recent years a host of new investor segments such as NBFCs, foreign portfolio investors, HNIs and insurance companies have also been participating, who do not have any specific focus on PSL assets,” it said, adding that as a result, there has also been an increase in the proportion of non-PSL asset segments such as two wheeler loans, small business loans and gold loans among others, being securitized.