India Ratings and Research on Thursday said that it has not seen any significant deterioration in the quality of assets in the securitisation market.
There has been increased securitisation of assets by non-banking financial companies (NBFCs) to access funds. While much of the underlying assets may have been scrutinised by banks before purchase, there seem to be concerns about the quality of some such pooled assets and about rating actions by agencies on such assets.
Jatin Nanaware, head and director - Structure Finance at India Ratings and Santosh Kamath, CIO - Fixed Income, Franklin Templeton, discussed with CNBC-TV18 the risks to the lenders on purchases of such securitised assets.
“Specifically on the securitisation of assets, the asset performance is significantly robust... the delinquency level for a securitised transaction has been always lower almost by 100 basis points to 150 bps than the originator's delinquency behaviour, which we have seen in their books. On a securitised side, we haven’t seen so far any significant deterioration in the asset quality,” Nanaware told CNBC-TV18.
“Specifically on India ratings, during last 18-20 years, the ratings, which we assigned which are backed by the retail loans for securitisation... we haven’t seen any default in India Ratings rated transaction,” he added.
In terms of the existing issue of DHFL, Kamath said, “I also don’t know too much about it because we don’t hold those papers but what I understand is, according to the theoretical concept we always thought that if you do a securitisation, it is off books of the company. It means that if you buy a pool of assets from an NBFC in a securitised form, whatever happens to the company doesn’t impact your pool. So theoretically that is correct that the risks are very different.”