The volume of PSLC market leapfrogged to around Rs 1.84 lakh crore in FY18 from mere Rs 50,000 crore in FY2017, diminishing the reliance of securitisation market and squeezing its volume 7 per cent.
Trading of PSLC was introduced in 2016 and FY18 was the first full year of its use. Here. banks needed to meet priority sector loan targets buy the priority sector obligation certificate from the seller bank without the transfer of risks or loan assets. Seller banks earn a fee without reduction in the loan portfolio unlike in securitisation or direct assignment deals.
ICRA estimated that securitisation or Pass Through Certificate (PTC) market volumes fell 24 per cent in FY18 to Rs 34,800 crore from Rs 43,000 crore in FY2017 despite a rise in non-priority sector loan securitisation.
"Achieving priority sector loan target is the main motive for investors in PTC transactions, while for direct assignment deals the motive is usually loan book growth. Thus, a dip in PTC volumes pursuant to the advent of PSLCs is on expected lines," ICRA's head for structured finance Vibhor Mittal was quoted as saying in a press note.
Non-priority sector PTC volume grew 72 per cent to Rs 8,850 crore in FY2018, making it one-fourth of overall PTC volumes.
The overall loan sell-downs in India are segregated into two types of transactions – rated securitisation or PTC transactions, and unrated direct assignments of pooled pools
Direct assignment of loan markets grew modestly by about 4per cent to an estimated Rs 49,000 crore in FY2018 from Rs. 47,000 crore in FY2017.
The corporate credit off-take in the banking industry remained sluggish in FY2018, resulting in good appetite from banks, especially, the public sector ones, to acquire retail assets under the direct assignment of loans to achieve balance sheet growth, ICRA said.