Securitisation of loans dips sharply in FY'13

MUMBAI: Securitisation of rated loans dipped 20% in FY’13 as corporate loan securitisation completely stopped during the year some, while some of the deals were not rated, according to ratings firm Icra.

A report on trends in securitisation based on the total pool of transactions it rates, indicates that volume of rated transactions including rated bilateral assignments fell by 20% in FY’13 to Rs. 30,250 crore. ``This decline was mainly because single corporate loan securitisations [also known as Single Loan Collateralised Loan Obligations (CLOs) or Loan Sell-Offs (LSOs)] completely stopped while some bilateral loan pool assignments were done on an unrated basis.”Icra report said. “The volume of securitisation of retail.”

During FY2013, banks were the key investors in securitisation transactions.

Going forward, ICRA expects the market dynamics to alter again following the clarity in the taxation regime for securitisation, brought in by the Union Budget

2013-14. The new tax treatment should open the path for mutual funds to invest in securitization transactions.

Both Asset-Backed Securitisation or ABS, and Residential Mortgage-Backed Securitisation or RMBS, cumulatively) declined by 14% in FY2013.

The RBI Guidelines on Securitisation and Direct Assignment issued in May 2012 for banks and in August 2012 for NBFCs prohibited issuers of securitised paper from providing credit enhancement or some kind of comfort for assignment transactions. This resulted in a significant shift from the assignment route to the conventional securitisation route.