Connect with us

Hi, what are you looking for?

[t4b-ticker]
Home » Business » Third COVID Wave To Impact Loan Collections And Securitisation, Says ICRA Report

Business

Third COVID Wave To Impact Loan Collections And Securitisation, Says ICRA Report

Image used for representation. (PTI Photo)

Mumbai: Lockdowns to contain the spread of the third COVID wave hurt loan collections and new lending by non-banks, and will in turn impact securitisation volumes, a domestic rating agency said on Tuesday.

The overall volumes of securitisation – where a non-bank lender passes on future receivables against loans or a bunch of loans to another entity for upfront cash – will come at Rs 1-1.1 lakh crore in FY22 as against the Rs 1.2 lakh estimated earlier, ICRA said in a report.

Securitisation volumes could thus be affected in the January-March quarter because the NBFCs (Non-Bank Finance Companies) and HFCs (Housing Finance Companies) may curtail disbursements, especially to COVID-impacted sectors, and investors would prefer to wait for the threat to subside, the agency said.

ALSO READ: Defence Middleman Sanjay Bhandari Sues French Arms Company Over ‘Unpaid’ ₹167-Crore Commission

Some states have already started imposing restrictions though of a milder nature so far, ICRA’s group head for structured finance Abhishek Dafria said, adding the lockdowns not only impact the collection ability as staff members fall ill but also the income generating ability of the borrowers.

In the event that the severity of the COVID infections grows and results in higher hospitalisation rates, the state governments may impose stringent lockdowns to control the spread of the virus and investors will also wait for the threat to subside, he said.

“Higher proportion of securitisation transactions are usually placed in March and thus we hope the spread of the virus would be contained sooner,” Dafria noted.

According to him, lower disbursements would also impact the growth of the securitisation market in FY23, he added.

Traditionally, securitisation through Direct Assignment (DA) transactions (bilateral assignment of pool of retail loans from one entity to another) has accounted for about two-third of total volumes, with Pass Through Certificate (PTC) transactions (loans are sold to an SPV which issues PTCs) accounting for the balance.

Due to the concerns around the COVID-related disruptions, preference for PTCs has increased (45 per cent share in Q3 volumes) since the credit enhancements in such structures would be able to absorb higher-than-expected losses than may arise in the transaction, the agency said.

Advertisement. Scroll to continue reading.

ALSO READ: Govt Likely To Increase Standard IT Deductions By 30-35%: Report

Read Full Article

Spotlight

Videos

The couple’s friends and family from across the globe will also be a part of the event, and will be able to enter the...

Politics

The Congress in Punjab is yet to decide on who will be its face in the Assembly elections. Chief Minister Charanjit Singh Channi and...

Sports

Lakshya Sen from Almora won against Singaporean world champion Loh Kean Yew in a thrilling final 24-22, 21-17. He became the first Indian to...

India

Due to COVID-19 restrictions, the number of visitors to be substantially curtailed this year. We are looking at a range of 5000 to 8000...

World

The team led by researchers at the University of Exeter found that 13 per cent of people still exhibited clinically-relevant levels of virus after...

You May Also Like

Politics

A Lok Sabha MP since 2014, Mann is a popular face in Punjab and is one of the indisputable comedy kings. Mann has also...

Videos

Dhanush in his shared statement, apart from revealing the shocking news also asked people to respect their decision and give them the needed privacy...

India

Prime Minister Modi also highlighted India's role in providing vaccines to the world.

India

Congress has yet now not officially announced the chief ministerial candidate and has maintained that it will contest the polls under a "joint leadership".

Advertisement