Securitisation Of Short-Term Loans To Be Impacted On RBI Rule Change
How will RBI's new norms on securitising loans affect smaller lenders.
The Reserve Bank of India's updated norms on securitisation of loans could impact the sale of pooled short-term assets, analysts noted.
Earlier this week, the regulator amended its master direction of securitisation of standard assets, which now mandate that loans with residual maturity of less than 365 days will not be eligible for securitisation. This norm will not apply to trade receivables.
Separately, the minimum holding period for mortgages has now been linked to the date of full disbursement, or registration of security interest, whichever is later. The minimum holding period refers to the period during which the original lender must hold a loan on its books, before selling it down to others.
India Ratings & Research Ltd. says that short-term loan products such as microfinance, gold loans, short-term personal and consumer durable loans would be affected by the regulatory change.
The total pass-through certificates volume in FY22 was Rs 57,000 crore, of which MFI PTC securitisation constituted around 9%. The agency believes that the quantum of such issuances could go down in the near term as the pool of assets to be securitised would decrease. This would also reduce the weighted average seasoning of securitisation pools henceforth.
"With the MHP requirement. it would not be possible to securitise the pool of gold loans having a remaining tenor less than 12 months or a total tenor of 15 months or below," India Ratings & Research said in a statement on Thursday.
Short-term personal and consumer durable loans of less than one-year tenor would not qualify for securitisation, it added.
"However, PTCs backed by these asset classes currently account for less than 5% of the securitisation market. The impact on other asset classes such as vehicle finance, SME loans and mortgages is expected to be limited considering their original loan tenures of three or more years,” said Krishnan Sitharaman, senior director and deputy chief rating officer, Crisil Ratings Ltd.
