INSUBCONTINENT EXCLUSIVE:
KOLKATA: Indian banks shun securitisation of loans to meet priority sector targets in favour of Priority Sector Lending Certificates (PSLC),
data from rating firm ICRA showed.
The volume of PSLC market leapfrogged to around Rs 1.84 lakh crore in FY18 from mere Rs 50,000 crore in
FY2017, diminishing the reliance of securitisation market and squeezing its volume 7 per cent.
Trading of PSLC was introduced in 2016 and
FY18 was the first full year of its use
banks needed to meet priority sector loan targets buy the priority sector obligation certificate from the seller bank without the transfer
Seller banks earn a fee without reduction in the loan portfolio unlike in securitisation or direct assignment deals.
ICRA estimated that
securitisation or Pass Through Certificate (PTC) market volumes fell 24 per cent in FY18 to Rs 34,800 crore from Rs 43,000 crore in FY2017
despite a rise in non-priority sector loan securitisation.
"Achieving priority sector loan target is the main motive for investors in PTC
transactions, while for direct assignment deals the motive is usually loan book growth
Thus, a dip in PTC volumes pursuant to the advent of PSLCs is on expected lines," ICRA's head for structured finance Vibhor Mittal was
quoted as saying in a press note.
Non-priority sector PTC volume grew 72 per cent to Rs 8,850 crore in FY2018, making it one-fourth of
overall PTC volumes.
The overall loan sell-downs in India are segregated into two types of transactions – rated securitisation or PTC
transactions, and unrated direct assignments of pooled pools
Direct assignment of loan markets grew modestly by about 4per cent to an
estimated Rs 49,000 crore in FY2018 from Rs
47,000 crore in FY2017.
The corporate credit off-take in the banking industry remained sluggish in FY2018, resulting in good appetite from
banks, especially, the public sector ones, to acquire retail assets under the direct assignment of loans to achieve balance sheet growth,
