Gold loan securitisation expected to witness healthy growth

New Delhi, Oct 27 (Agency) The overall growth for gold loan NBFCs will be robust in the near to medium term which would support healthy volumes of gold loan securitisation with its share in overall securitisation market being eigh-ten per cent, rating agency ICRA has said. Gold loan securitisation saw a healthy pickup post FY2019 driven by the growth in the gold loan book of NBFCs (Non-Banking Financial Companies) and very low delinquency levels that increased investor appetite, it observed. Gold loan securitisation volumes were about Rs 4,400 crores in first half of FY2022 (similar to volumes seen in H1 FY2021) forming ten per cent of the overall domestic securitisation volumes as compared to six per cent seen in FY2020 (pre-Covid period). During the Covid-19 pandemic, gold loans were considered to be a safer asset class given the availability of a liquid collateral and rising gold prices.

While direct assignment (DA) transactions had a dominant share, the share of PTCs in gold loan securitisation had been rising, it said. The low delinquencies in gold loans were also supported by the gold prices that had largely seen an upward trajectory in the last seven-year period. While there has been a moderation in gold prices in the second half of FY2021 with around ten per cent decline in gold prices over peak of August 2021, the decline was moderate in YTD FY2022, the agency observed. “Lower delinquencies, liquid collateral and affinity for borrowers towards gold jewellery have ensured healthy investor appetite for gold loan securitisation,” Abhishek Dafria, Vice President and Group Head – Structured Finance Ratings at ICRA, said. ”While NBFCs have been using securitisation as a funding tool it is seen that given the lower tenure for gold loan PTCs (Pass Through Certificates), NBFCs have also been exploring structures like replenishing PTCs and covered bonds to get access to longer term funding,” he said further.