Indian securitisation market remains stagnant as PSLCs rule the market

Despite the economic slowdown due to GST, the Indian securitization market has performed fairly well, though it has not been able to match the volume of last year. During FY 17-18, the overall volume of the market stood at Rs. 84,000 crores, which is Rs. 1000 crores less than what happened a year back. Of the total volume, there were direct assignments worth Rs. 49000 crores and the remaining were pass through certificates. After the introduction of the securitization distribution tax in 2012, the market shifted towards DAs and the same continued until 2016 when the same was removed. This also reduced the gap between DAs and PTCs, however, the gap has increased once again. The following two graphics show the trend of securitization and the market composition (DAs vs PTCs) during the last few years.

The market showed a 72% YoY growth on issuance of pass through certificates from Rs 25000 crores in FY16 to Rs 43000 crores in FY17 however, and a 24% decrease in FY18 to Rs 34800 crores. The slowdown in securitisation was mainly due to lack of clarity surrounding incidence of Goods & Services Tax on the ‘assignment’ of secured loan receivables as well as a sharp spike in PLCS lending volume.

The volume of PSLC market leapfrogged to around Rs 1.84 lakh crore in FY18 from mere Rs 50,000 crore in FY17. Trading of PSLC was introduced in 2016 and FY18 was the first full year of its use. Here, banks needed to meet priority sector loan targets buy the priority sector obligation certificate from the seller bank without the transfer of risks or loan assets. Seller banks earn a fee without reduction in the loan portfolio unlike in securitization or direct assignment deals. The PLCS are also easier to execute as happens without any real transfer of assets whereas PTCs require pooling of assets and selling it.

Despite a slowdown in the market, several new asset classes were tried during the year. For the first time, asset classes like educational loans, consumer durable loans were tried. The market also witnessed return of Collateralised Loan Obligations.

7th Securitisation Summit, 2018 & 2nd Indian Securitisation Awards

Vinod Kothari Consultants, along with the Indian Securitisation Foundation, has also announced the 7th Securitisation Summit, 2018 on 25th May, 2018 at World Trade Center, Mumbai. This is an industry forum where stakeholders from the entire industry gather to discuss various issues concerning the market and try to take up issues with the regulatory authorities so as to make the environment facilitating in India. The details of the event can be viewed at: www.vinodkothari.com/secsummit/

Also, during this years’ summit, Indian Securitisation Foundation will also announce the second edition of the Indian Securitisation Awards. There are five categories award – most innovative deal of the year, large and small arrangers of the year, trustee of the year and law firm of the year.  Details can be viewed at:

http://vinodkothari.com/wp-content/uploads/2018/04/INDIAN-SECURITISATION-AWARDS-2018-BROCHURE.pdf

Despite economic slowdown due to GST, the Indian securitization market performed fairly well