NBFCs -; HFCs securitization volume doubles to Rs33,000 crore in Q1

12 Jul 2022 , 11:18 AM

Securitisation volumes originated by Non-Banking Financial Companies (NBFC)s and Housing Finance Companies (HFC)s have almost doubled to around Rs33,000 crore in the first quarter of the current financial year, a report said on Monday. The volume of such transactions is expected to cross Rs1.5 lakh crore in FY23, Icra Ratings said in a report.

In addition to this, "the growth in volumes reflects a 1.9 times increase when compared to Rs17,200 crore of securitised assets in Q1FY22 and a 4.4 times increase compared to Rs7,500 crore in Q1 FY2021", the report said.

"With the growth in credit demand, the disbursements picked up for NBFCs and HFCs in Q4 FY22 and have remained buoyant in Q1 FY23, thereby resulting in higher funding requirements which have been partly met through the securitisation of their retail loans," the agency's Vice President and Group Head (structured finance ratings) Abhishek Dafria said in a report.

Accordingly, the securitisation market is primarily intended to redistribute the credit risk away from the originators to a wide spectrum of investors who can bear the risk, thus aiding financial stability and providing an additional source of funding.

Dafria further said that securitisation is a key tool for NBFCs and HFCs, which will help them diversify the means of funding and broaden their investor base.

"If there are no pandemic related disruptions, we expect securitisation volume could cross Rs1.5 lakh crore in FY23 as against Rs1.3 lakh crore in FY22, and the number of originators who securitised their assets in Q1 FY23 increased sharply to 70 from 46 in Q1 FY22", he added.

According to the another report, Corporate bond issuances inQ1FY2023 were at the lowest level in the last four years as investors adopted a wait-and-watch approach for fresh investments in therising yield environment.