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India Ratings has given a “stable” outlook to the Indian structured finance business.
Structured financeis largely securitisation deals in the Indian context, a process where companies sell their loans in the market.
India Ratings has given a “stable,” rating to securities, which have commercial vehicles as the underlying asset as the default trend is in line with its expectation. Rising diesel prices, without commensurate rise in freight rates, and slowing industrial activity pose risk of non-repayment of loans by borrowers of commercial vehicles.
The rating pertains only to commercial vehicle loans originated by the non-banking financial companies. India Ratings also maintained a “stable,” outlook on tractor loan asset backed security as the agency’s research found that tractor owners also earn from other sources apart from agriculture.
The rating agency, formerly known as Fitch Ratings, said that minimum support prices for crops have increased much more than the increase in input prices for the underlying farm borrowers.
Hence, farmers who have borrowed for the purchase of tractors have a higher ability to repay their loans.
The research also found that tractors are used increasingly for non-agricultural purposes such as haulage and construction related activities, thereby providing a second source of income to borrowers. “The performance of tractor loans is not strongly correlated with rainfall in recent years,” India Ratings, said. For the tractor loan ABS rating, the agency said that its rating is based on a “sizeable” sample size.
RESIDENTIAL MORTGAGES
India Ratings also maintained a “stable,” outlook on residential mortgages and residential mortgage-backed securities. It believes that the prudent loan-to-value (LTV) ratios that the lending institutions follow and an appreciating property market, lend themselves well for reduced defaults.
The sample for this survey was mainly loans in the affordable segment up to Rs 25 lakh, Sandeep Singh, Senior Director & Head – Structured Finance said.
satyanarayan.iyer@thehindu.co.in
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