A report by India Ratings shows that lack of priority sector lending eligible assets reduced the rate of securitisation in the country, even as credit quality of such assets improved.
At least 35 per cent of assets became ineligible for PSL (priority sector lending) qualification because of the introduction of the rate-cap for eligibility under PSL along with the need to meet a holding period requirement, the report said.
Securitisation is a process that pools various types of contractual debts like residential mortgages and commercial mortgages among others into consolidated debt, which is then sold as bonds, pass-through securities or collateralised mortgage obligation to various investors.
After the issue of securitisation guidelines by RBI last year, there have been increased instances of retention by the originators, the report shows.
The credit quality of underlying loans in securitisations has improved and there has been greater alignment of incentives between investors and originators in the last one year.
The paucity of assets in turn have partly led to a 175 basis points drop in rates offered to investors, though yield on government securities have dropped only 40 basis points since the issue of the guidelines, the report said.