Print Close

Wed, May 13 2015. 10 11 PM IST

Securitization is the process of pooling loans and turningthem into marketable securities that can be sold toinvestors. Photo: Bloomberg

RBI norms to hit loan securitization market: IcraAccording to the agency’s estimates, India’s securitization volume dipped 40% to Rs.17,200 crore in fiscal 2015, from Rs.28,800 crorethe previous fiscal

Mumbai: The Reserve Bank of India’s (RBI) new priority sectornorms released last month will lead to slowing down of the alreadydepressed securitization market in India, credit rating agency ICRALtd said on Wednesday.

According to the agency’s estimates, India’s securitization volumedipped 40% to `17,200 crore in fiscal 2015, from `28,800 crore theprevious fiscal. The 2014 figure was way lower than the `37,876crore notched up in the year ended March 2012.

Securitization is the process of pooling loans and turning them intomarketable securities that can be sold to investors.

“Going forward, ICRA expects the securitization market to beimpacted adversely on account of the recent revision (April 2015) inpriority sector lending (PSL) guidelines, as banks may find it easierto meet PSL targets on their own,” said Kalpesh Gada, head-structured finance, ICRA.

Indian banks have to lend 40% of their net bank credit to borrowersin sectors such as agriculture and to small enterprises. Under the revised norms, RBI expanded the scope of PSL to include medium-sizedenterprises, social infrastructure and renewable energy and also did away with the distinction between direct and indirect lending toagriculture.

The easier guidelines will give banks more room to fulfil their obligations. This will mean banks, especially those in the private sector, thatused to queue up to buy securities to fulfil their priority sector obligations may not need to do so.

However, the revised norms also said foreign banks with less than 20 branches would have to achieve 40% PSL like all other banks in aphased manner till fiscal 2020, up from 32% so far. ICRA said the appetite for securities from foreign banks could soften the impact of alower demand for these papers from domestic banks.

The bulk of the loans securitized in India are those given for commercial vehicle and construction equipment purchases, which originate inthe NBFC (non-banking finance company) sector. Loans of under `50,000 to individual borrowers are usually pooled for securitizationpuposes.

18/10/2015 RBI norms to hit loan securitization mar…

livemint.com/…/RBI-norms-to-hit-loan-s… 1/1