Collection ratios in securitised pools dip during 2nd wave of Covid-19 pandemic: Crisil

Rating agency Crisil Ratings in its latest report has said that collection ratios in securitised pools have seen a dip during the second wave of the Covid-19 pandemic. It said unlike in the first wave, the decline in the second wave has not been as sharp for two reasons - localised restrictions limited the impact on business activity, and lack of moratorium from lenders meant that borrowers could not postpone their debt repayments. 

According to the report, this prompted many financing entities to explore digital collection – an avenue that has played an important role in preventing a similar fall in collections during the second wave. It also said securitisation is the process of pooling and repackaging of homogenous illiquid financial assets into marketable securities that can be sold to investors. Non-banking financial companies (NBFCs) have been also reworking their collection process since the onset of the pandemic by increasingly adopting electronic modes such as auto-debit, payment gateways and dedicated applications. 

The agency further said such productivity enhancement was one of the reasons for the sharp recovery in collection ratios of securitised pools during the second half of last fiscal. It also said as more businesses set up online modes for business continuity, their cash flows become less prone to disruption. Mortgage loans remained the most resilient of all asset classes. While commercial vehicle loans saw a dip in median collection ratios of almost 11 percentage points in May 2021, it expects the collections to improve going forward in line with the recovery expected in the economic activity.