NBFC MFIs raised close to Rs 26,200 crore through securitisation deals in financial year 2018-19 (FY19), a rise of 170 per cent over last financial year, according to a report by credit rating agency Icra. They had raised close to Rs 9,700 crore in FY18.

Much of the rise was on account of direct assignments (DA). As per Icra estimates, transaction volumes undertaken by NBFC-MFIs through DA were around Rs 13,500 crore for FY2019, as against only Rs 4,000 crore and Rs 3,000 crore in FY2018 and FY2017 respectively.

“Securitisation has always been an important funding tool for NBFC-MFIs, but dependence was particularly high during the second half of fiscal 2019,” said Vibhor Mittal, Group Head–Structured Finance Ratings at ICRA.

"In FY2018 and H1 FY2019, securitisation contributed to only 18-20 per cent of overall disbursements. However, this number leapfrogged to 37 per cent and an estimated 50 per cent in Q3FY19 and Q4FY19 respectively. In other words, almost half the incremental disbursements in Q4FY2019 are estimated to have been met through the securitisation route,” Mittal added.

Forty-three entities raised funds through the securitisation route in FY19 (as opposed to only 24 such entities in FY18). Out of this, as many as 14 entities were first time entrants in the securitisation market. The yields were higher by 100-150 bps for both Priority Sector Lending (PSL) driven and non-PSL transactions in Q3 FY19 over the lows seen in FY18, according to ICRA.

The securitisation market in India can be segregated into two types of transactions -– rated Pass Through Certificate (PTC) transactions, and unrated DA transactions (bilateral assignment of pool of retail loans from one entity to another). The PTC route has historically been the preferred route for microfinance asset class, the report says.