Performance update on Crisil rated securitization transactions¹

Crisil has analysed the collection performance of asset-backed securities (ABS) and mortgage backed securities (MBS) under its surveillance till March 2020. 

The transactions are backed by receivables from commercial vehicle loans (CV), car loans, tractor loans, construction equipment (CE) loans, IT & health-care equipment loans, gold loans (GL), cash / personal loans, real estate developer (RE) loans, consumer durable loans (CD), education loans (EL), loans extended to small & medium enterprises (SME), two-wheeler loans (TW), microfinance (MFI) loans, home loans (HL) and loans against property (LAP). 

Collection ratios of the pools remained robust until the lock-down was initiated in late March 2020

The collection performance of all pools under Crisil’s surveillance remained robust until March 2020 as evidenced by the average cumulative collection ratios (CCR) of 94.8% and 100.7% for ABS and MBS pools, respectively as of March 2020 payouts.

Although a country-wide lockdown was in effect from late March 2020, the monthly collections of most of the pools under Crisil’s surveillance were not materially impacted even in March 2020 as due dates for instalment payments for most pools fall earlier in the month. The impact on collection efforts during the last few days of the month on account of the lockdown, however, meant that the monthly collection ratio for ABS transactions in March, which is usually a seasonal peak, was one of the lowest across several years. Median monthly collection ratio (MCR) for April 2020 payouts was 91.4%, compared to 99.6% clocked in the corresponding month last year.

Collection ratios have since declined post the announcement of payment moratorium to underlying borrowers

The Reserve Bank of India (RBI) on 27 March 2020 announced the COVID-19 package permitting financiers to grant payment moratorium to borrowers for the three months ending May 2020. The moratorium period was subsequently extended till August 2020.

In line with the RBI announcement, most financiers granted moratorium to their borrowers on the instalments falling due till May 2020 and consequently, the collections from the securitised pools dropped sharply in April 2020. In Crisil rated pools, high proportion of contracts, 100% in several cases, have opted for moratorium. 

Ratings on Pass Through Certificates (PTCs) were, however, supported by the revision in PTC payout schedule, in line with moratorium granted to borrowers 

Despite the lower collections since April, the ratings of a vast majority of PTC transactions have remained resilient on account of the redrawing of PTC payout schedules. Given the pass through nature of the PTC payouts, investors of most of the PTC transactions under Crisil’s surveillance approved a revision in PTC payouts to be made during the moratorium period to broadly mirror the redrawn billing schedule of the underlying borrowers who opted for the moratorium. 

Crisil had ratings under 200+ transactions during the quarter ended March 2020. Till date, ratings under only 14 transactions have been downgraded or placed on rating watch on account of the weaker macro-economic scenario and/or the investor not providing any moratorium on PTC payouts until June 2020. Crisil is currently closely monitoring the status of the moratorium pertaining to July 2020 to September 2020 payouts.

All Crisil-rated securitised instruments are under continuous surveillance until investor payouts are made in full. Crisil disseminates the ratings/credit opinions through its quarterly publications and press releases in a timely manner. The ratings/credit opinions represent Crisil’s view on the transactions as on June 25, 2020.

¹Single loan sell down transactions are not part of this report