During the first wave of Covid, loan repayment collections were significantly reduced due to a strict lockdown and extension of the moratorium on loan repayments.
According to rating agency Crisil, the monthly collection rate of the securitized pool remained stable due to the limited impact of restrictions imposed by the local government and the digitization of payment collections by companies.
The collection efficiency of securitization transactions, assessed by Crisil ratings, showed that collections from mortgage-backed securities pools, vehicle pools, two-wheeler pools and SME pools remained above 96% in February.
“The restrictions imposed to contain the spread of the pandemic in the third wave were relatively less intense than those in previous waves. In addition, many financiers have made great efforts to digitize their collection processes. Both factors have quarantined securitized pool collections from any material impact arising from pandemic-related disruptions during the third wave,” said Krishnan Sitaraman, senior director and deputy chief ratings officer, Crisil Ratings in a press release.
During the first wave of Covid, loan repayment collections were significantly reduced due to a strict lockdown and extension of the moratorium on loan repayments. Collections have started to improve for non-bank finance companies (NBFC) after the economy opened up during the unlocking process.
NBFCs had taken a lot of effort, such as rearranging operations, retraining staff and refocusing spending. Despite the enormous stress on underlying borrowers in pools, there was little action for downside ratings. At a time when collection ratios were severely affected, credit improvements emerged to eliminate collection shortfalls.
Rohit Inamdar, senior director of Crisil Ratings, said the NBFC’s solid performance over the past two years is an indicator to investors that securitization remains a reliable, time-tested route to gain exposure to high-value loan assets.
This post Securitized pool collection remains stable on limited impact of Covid curbs
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