COVID 3rd Wave Impact Muted; Securitised Pool Collection Ratios Largely Unaffected Across Asset Classes: Report
Moneylife Digital Team 15 March 2022
Monthly collection ratios (MCRs) of securitised pools rated by CRISIL Ratings have remained stable through the third wave. This was because the localised administrative restrictions, introduced in December 2021 and January 2022 to mitigate the effect of the omicron variant of COVID-19, had a limited impact on the economic activity, the rating agency says. 
According to CRISIL, as borrowers’ workflows continued unhindered to a large extent, their cash flows stayed largely intact, and they supported timely loan repayment in securitised pools, resulting in no significant impact on pool collections. It is also evident in the low level of restructuring opted for by borrowers in these pools.
Krishnan Sitaraman, senior director and deputy chief ratings officer of CRISIL Ratings says, “The restrictions imposed to combat the pandemic’s spread in the third wave have been comparatively less intense than those in earlier waves. Additionally, many efforts have been made by several financing entities to digitalise their collection processes. Both these factors have quarantined securitised pool collections from any material impact arising out of pandemic related disruptions during the third wave.”
For ring-fencing collections from any business, economic or regulatory disruptions, several non-banking financial companies (NBFCs) undertook efforts like re-jigging operations, retraining staff, and re-orientation of expenditures towards tech-enabling to demonstrate management focus to operationalise these changes. This, even as ‘feet-on-the-street’ continues to remain the mainstay of business origination for most financing entities.
According to the rating agency, all asset classes have displayed remarkable stability in collection performance. Mortgage-backed securitisation (MBS) pools witnessed a high of about 100% collection (see chart below) in February 2022 payouts, reaffirming the long-held belief that home loans are among the most resilient retail asset class.
Two-wheeler and small and medium enterprise (SME) loans saw collection ratios of around 100% and 96% in February 2022 payouts. This was much higher than the average MCR of 66% and 60%, respectively, during the first wave and 97% and 93% respectively during the second wave, CRISIL says.
Meanwhile, commercial vehicle (CV) loan pools saw a marginal fall in MCRs to 99% in February 2022 payouts from 102% in January 2022 payouts – quarter-end collections being usually higher than the preceding two months. However, it says, even at 99%, MCRs were significantly higher than average MCRs of 51% during the first wave and 95% during the second wave of the pandemic.
CRISIL says its rated securitisation transactions have shown tremendous resilience during the last two years that have been impacted by various waves of the pandemic. 
It says, “Despite bouts of tremendous stress on underlying borrowers in pools, there were very few downward rating actions. When collection ratios were dented severely, credit enhancements (provided initially) came to the fore to iron out the collection shortfalls. These were subsequently replenished as most of the rated transactions have witnessed smart recoveries and returned to performance on the expected trajectory.
According to Rohit Inamdar, senior director of CRISIL Ratings, considering the loans in pools underlying securitisation transactions are cherry-picked, their performance vis-à-vis the overall portfolio is usually comparatively better. 
“Their solid performance in past two years is an indicator to investors that securitisation remains a reliable, time-tested route to gain exposure to quality loan assets. In this regard, their outperformance is a testament to the resilience of securitisation as a process,” he added.
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