Loan sale ac­tiv­ity by banks, NBFCs shrinks in FY18

Pri­or­ity sec­tor loan pa­per trad­ing grows three­fold

Business Standard - - ECONOMY & FINANCE - AB­HI­JIT LELE

Loan sell-down ac­tiv­ity, com­pris­ing se­cu­ri­ti­sa­tion and di­rect as­sign­ment, by banks and fi­nance com­pa­nies in In­dia shrunk 7 per cent to ~830 bil­lion in 2017-18, from ~900 bil­lion in 2016-17, ac­cord­ing to rat­ing agency Icra.

Se­cu­ri­ti­sa­tion is pool­ing of con­trac­tual debt like home and au­to­mo­bile loans and credit card re­ceiv­ables, then sell­ing their re­lated cash flows to third-party in­vestors as se­cu­ri­ties-like bonds. This was af­fected by a rise in trad­ing into pri­or­ity sec­tor lend­ing cer­tifi­cates (PSLCs) and un­cer­tainty over ap­pli­ca­bil­ity of the goods and ser­vices tax.

Pass-through cer­tifi­cate (PTC) vol­umes fell 24 per cent to ~348 bil­lion in 2017-18. While vol­umes in di­rect as­sign­ment (DA) trans­ac­tions rose 4 per cent to an es­ti­mated ~490 bil­lion. The lat­ter trans­ac­tions in­volve bi­lat­eral as­sign­ment of a pool of loans from one en­tity to an­other.

Icra said the mar­ket saw a host of as­set classes get­ting se­cu­ri­tised for the first time or mak­ing a come­back af­ter a long time. Cor­po­rate term loans, con­sumer durables loans, and ed­u­ca­tion loans were some of the new classes that drew in­vestor in­ter­est.

Among tra­di­tional as­set classes, hous­ing loans were a third of to­tal sell-down vol­umes. Fol­lowed by com­mer­cial ve­hi­cles at 29 per cent, mi­cro­fi­nance at 13 per cent, and loans against prop­erty at 12 per cent, it added.

Vib­hor Mit­tal, head of struc­tured Fi­nance at Icra, says achiev­ing the PSL tar­get is the main mo­tive for in­vestors in PTCs; for DA trans­ac­tions, the mo­tive is usu­ally loan book growth. Thus, a dip in PTC vol­umes pur­suant to the ad­vent of PSLCs is on ex­pected lines.

Trad­ing in PSLCs jumped to around ~1.84 tril­lion in 201718, from ~500 bil­lion in 201617. It means banks re­lied much less on the se­cu­ri­ti­sa­tion route to meet the PSL short­fall.

Trad­ing in PSLCs jumped to around ~1.84 tril­lion in 2017-18, from ~500 bil­lion in 2016-17

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