Ind-Ra said spike in cases and curbs could disrupt supply chains, foreign portfolio investments and domestic credit markets. Various states in the country have taken steps including curbs like curfews and weekday activity restrictions till end of April 2021 with hope to contain spread. The economic impact of these curbs will depend on their duration and severity.
Amid a cautious financial system, the condition was improving, allowing low rated issuers to access capital though at a significantly high cost. Some of these gains could reverse and risk aversion could increase.
India Ratings said a conducive financing option is necessary, and volatile capital market condition impinges on such propositions. However, the enormous banking system liquidity and proactiveness from the Reserve Bank of India will alleviate the risk of a market failure.
Regulators appear keenly aware of the credit and liquidity implications of any broad, extended movement curbs.
Icra said NBFCs
and housing finance
companies (HFCs) securitised loans worth Rs 40,000 crore in Q4 FY2021, similar to volumes seen in Q4 FY2020. The securitisation volumes for FY2021 were Rs 85,000–90,000 crore, of which volumes in Q4 itself contributed nearly 45 per cent. The annual securitisation volumes may increase by 40-50 per cent in FY22 compared to FY2021.
The rising Covid-19 cases may again create uncertainty among the investors. An unabated increase in the Covid cases is likely to bring about fears of harsher lockdowns. It could impact the asset quality of retail loans especially for unsecured loans such as in the microfinance sector. This in turn would impact the fund-raising ability of the NBFCs
and HFCs through securitisation of their assets, said Abhishek Dafria, Vice President and Head-Structured Finance
Ratings, at Icra.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.