With curbs easing, securitisation pool collections spring back

September 27, 2021 location

Mumbai

Gradual phasing out of social restrictions has improved the monthly collection ratios of securitised pools rated by CRISIL Ratings, which had declined between April and June 2021 following the second wave of the Covid-19 pandemic.

The trend in improving collection efficiencies has been seen across asset classes and in a number of segments, the levels are quite close to pre-pandemic levels.

Collection ratios in mortgage-backed securitisation (MBS) pools have rebounded to near-100% (see annexure) ― their pre-pandemic normal ― in the pay-out months of July and August 2021 (the data comes with a month’s lag, so July and August payout numbers refer to the collections made for June and July, respectively). MBS pools, with home- or property-backed loans as underlying, have shown extremely high resilience across economic cycles.

Says Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings, “In asset-backed securitisation (ABS) pools, collection ratios are set to reach January-March 2021 pay-out levels after dipping to 84% in Q1 this fiscal. Median collection ratios for vehicle loan pools for August pay-out reached 100%, just a tad short of the March collection ratio of 101%.”

Similar is the case with two-wheeler and small and medium enterprise (SME) loan pools, where collection ratios had declined to 95% and 78%, respectively, for June pay-out, but rose to 98% and 90%, respectively, for August (see annexure). Government focus on rural areas and agriculture, and launch of schemes for SMEs have helped here.

Since the onset of the pandemic, monthly collection ratios have become the barometer of underlying economic activity, and are being closely monitored by banks, originating non-banking financial companies (NBFCs¹), investors in securitised pools and intermediaries such as deal arrangers.

Says Rohit Inamdar, Senior Director, CRISIL Ratings, “To be sure, securitisation volume after the second wave remains a pale shadow of what it was before the pandemic began. What’s encouraging, however, is the limited decline in collections after the second wave. The ongoing recovery should improve investor confidence and increase interest in securitisation transactions.”

After the August pay-out, there is adequate credit cover in transactions rated by CRISIL Ratings.

CRISIL Ratings had also highlighted the impact on collection efficiencies on its rated securitisation transactions due to the pandemic in a recent press release².

Unlike the first wave of pandemic which saw very stringent lockdowns, the economic impact of the second wave was much lower as the lockdowns were localised and less stringent. This is also reflected in two aspects: one, a lower fall in collection efficiencies in securitised pools; and two, sparse traction for any form of restructuring among retail loan borrowers post the second wave, in contrast to a number of them seeking relief under the moratorium / restructuring scheme announced post the first wave.

CRISIL Ratings will continue to monitor collection ratios, past trends and underlying asset quality of securitised pools under surveillance, and will take appropriate rating action should there be any event impacting the recovery in collections over the near term, or if delinquencies are higher than anticipated.

Gradual phasing out of social restrictions has improved the monthly collection ratios of securitised pools rated by CRISIL Ratings, which had declined between April and June 2021 following the second wave of the Covid-19 pandemic.

The trend in improving collection efficiencies has been seen across asset classes and in a number of segments, the levels are quite close to pre-pandemic levels.

Since the onset of the pandemic, monthly collection ratios have become the barometer of underlying economic activity, and are being closely monitored by banks, originating non-banking financial companies (NBFCs¹), investors in securitised pools and intermediaries such as deal arrangers.

After the August pay-out, there is adequate credit cover in transactions rated by CRISIL Ratings.

CRISIL Ratings had also highlighted the impact on collection efficiencies on its rated securitisation transactions due to the pandemic in a recent press release².

Gradual phasing out of social restrictions has improved the monthly collection ratios of securitised pools rated by CRISIL Ratings, which had declined between April and June 2021 following the second wave of the Covid-19 pandemic.

The trend in improving collection efficiencies has been seen across asset classes and in a number of segments, the levels are quite close to pre-pandemic levels.

Since the onset of the pandemic, monthly collection ratios have become the barometer of underlying economic activity, and are being closely monitored by banks, originating non-banking financial companies (NBFCs1), investors in securitised pools and intermediaries such as deal arrangers.

After the August pay-out, there is adequate credit cover in transactions rated by CRISIL Ratings.

CRISIL Ratings had also highlighted the impact on collection efficiencies on its rated securitisation transactions due to the pandemic in a recent press release2.

Since the onset of the pandemic, monthly collection ratios have become the barometer of underlying economic activity, and are being closely monitored by banks, originating non-banking financial companies (NBFCs¹), investors in securitised pools and intermediaries such as deal arrangers.

CRISIL Ratings had also highlighted the impact on collection efficiencies on its rated securitisation transactions due to the pandemic in a recent press release².