Securitisation Pool Collections Spring Back with Easing of COVID Curbs: Report
Moneylife Digital Team 27 September 2021
Gradual phasing out of social restrictions has improved monthly collection ratios of securitised pools which had declined between April and June 2021 following the second wave of the COVID-19 pandemic, says a research note.
In the report, CRISIL Ratings says, "The trend in improving collection efficiencies has been seen across asset classes, and in several segments, the levels are quite close to pre-pandemic levels."
According to the rating agency, unlike the first wave of the pandemic, which saw very stringent lock-downs, the economic impact of the second wave was much lower as the lockdowns were localised and less rigid. 
"This is also reflected in two aspects. First, a lower fall in collection efficiencies in securitised pools; and second, sparse traction for any form of restructuring among retail loan borrowers post the second wave, in contrast to a number of them seeking relief under the moratorium or restructuring scheme announced post the first wave," it says.
Collection ratios in mortgage-backed securitisation (MBS) pools have rebounded to near-100% their pre-pandemic normal in the payout months of July and August 2021. The data comes with a month's lag, so July and August payout numbers refer to the collections made for June and July, respectively. MBS pools, with home- or property-backed loans as underlying, have shown extremely high resilience across economic cycles.
Krishnan Sitaraman, senior director and deputy chief ratings officer of CRISIL Ratings, says, "In asset-backed securitisation (ABS) pools, collection ratios are set to reach January-March 2021 payout levels after dipping to 84% in first quarter (Q1) this fiscal. Median collection ratios for vehicle loan pools for August payout reached 100%, just a tad short of the March collection ratio of 101%."
Similar is the case with two-wheeler and small and medium enterprise (SME) loan pools, where collection ratios had declined to 95% and 78%, respectively, for June payout but rose to 98% and 90%, respectively, for August. The ratings agency says that the government focus on rural areas and agriculture, and the launch of schemes for SMEs have helped here.
According to the ratings agency, monthly collection ratios have become the barometer of underlying economic activity since the onset of the pandemic.
They are closely monitored by banks, originating non-banking financial companies (NBFCs), investors in securitised pools and intermediaries such as deal arrangers.
Rohit Inamdar, senior director of CRISIL Ratings, says, "To be sure, securitisation volume after the second wave remains a pale shadow of what it was before the pandemic began. What is encouraging, however, is the limited decline in collections after the second wave. The ongoing recovery should improve investor confidence and increase interest in securitisation transactions."
After the August payout, there is adequate credit cover in transactions rated by CRISIL Ratings.
CRISIL Ratings says it will continue to monitor collection ratios, past trends and underlying asset quality of securitised pools under surveillance and will take appropriate rating action should any event impact the recovery in collections over the near term if delinquencies are higher than anticipated.
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