Rating agency ICRA in its latest report has said that the domestic securitization volumes of retail pools originated by non-banking financial companies (NBFC) and housing finance companies (HFC)) are likely to witness a healthy bounce back in FY2022, after witnessing a sharp contraction in the current fiscal so far. It noted that the rise in volumes for the remainder of the current fiscal and for FY22 would be driven by growing investor confidence in asset quality due to improving collections; higher funding requirement of originators on account of increasing disbursements and improving business activities post the end of lockdown and moratorium period.
According to the report, the collections across all asset classes have bounced back sharply since the dip seen in April 2020 following the nationwide lockdown. It also said the resumption of businesses, as the lockdown has gradually eased, has supported the ability of the retail borrowers to meet their EMI payments. It added that this has reduced investor wariness towards purchase of retail pools that has led to a healthy momentum in fresh securitisation from September 2020 onwards.
The report further said the financing requirements for NBFCs and HFCs are also expected to increase in FY22 as disbursements would be closer to the pre-Covid levels which in turn would support the securitisation market as a tool to diversify funding sources. It said sppetite for securitisation of unsecured loans though still remains relatively weak and would only improve if the collection efficiency for such asset classes continues to increase in a sustainable manner.