The Indian securitisation market is adjusting well to the revised securitisation guidelines issued by the Reserve Bank of India in May 2012, according to Crisil rating agency.

“After a brief pause following their introduction, market activity has resumed; total market volumes from May to mid-October 2012 were stable, at Rs 3,400 crore (38 transactions), as against Rs 3,500 crore (38 transactions) for the corresponding period of the 2011-12.

The revised guidelines inhibit credit enhancement in direct assignments, thereby diminishing the attractiveness of the route, leading to a shift to the pass through certificate (PTC) route. Transactions through the PTC route have accounted for more than 85 per cent of the total issuances since the guidelines were issued, as against less than 20 per cent in 2011-12.

The securitisation market is also gradually widening, through the addition of gold loans as an asset class and participation from a broader set of originators.

The two revised regulatory norms reduce the availability of assets eligible for securitisation. First, the provision on minimum holding period that requires originators to hold assets longer to increase their seasoning. Secondly, the assets should conform to a maximum interest-rate of 8 per cent above the investing banks’ base rate to receive priority sector status.

Says Pawan Agrawal, Senior Director, CRISIL Ratings, “Since the time there was a brief pause in securitisation activity after the issuance of the revised norms, the market has resumed, and we have seen a structural shift toward the PTC route, which is more capital intensive for originators vis-à-vis direct assignments.”

Beena.parmar@thehindu.co.in

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