SKS Microfinance raises Rs 2800 crore in securitisation deals

KOLKATA: In what appears to be a signs of revival in the moribund securitisation market, SKS Microfinance, the listed lender to the poor, has raised Rs 2800 crore by selling its receivables to investors in the fourth quarter. This was 80% more than what the micro lender did in the same quarter previous year.

Securitisation is a process of pooling various types of loan receivables and selling their related cash flows to third party investors as securities. This frees up capital which can be used for fresh lending.

SKS Microfinance president Dilli Raj told ET that the micro lender had sold pass through certificates to raise Rs 2310 crore from investors while it sold receivable worth Rs 506 crore directly to banks. In 2014-15, SKS had raised Rs 1559 crore by selling loans through these routes.

In India, securitisation deals are largely driven by banks' need to meet priority sector lending targets. Banks with gaps in priority lending are allowed to invest in pass through certificates wherein underlying loans are priority sector-compliant. Banks can also purchase priority sector loan receivable pools from other lenders directly to meet the gap which is known as direct assignment.

The market volume of has shrunk over the years with Reserve Bank of India widening the priority sector definition for banks making it easier for banks meet the target.