December 03, 2008
                                              Mumbai


     Indian securitisation market solid amidst gl...
Media Contact                             Analytical Contacts                            CRISIL Rating Desk
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Crisil Ratings Indian Securitisation

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A study by CRISIL reveals that the retail securitisation market in India is better placed than it is in many other countries, notably the US.
The Indian market has shown greater stability, with few rating downgrades, and zero losses on investor payouts.
CRISIL believes that the relative stability is because of the superior profile/robustness of the assets securitised in India, and because the financial instruments created out of the securitised assets in India are far less complex than those in developed markets.

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Crisil Ratings Indian Securitisation

  1. 1. December 03, 2008 Mumbai Indian securitisation market solid amidst global meltdown: CRISIL A study by CRISIL reveals that the retail securitisation market in India is better placed than it is in many other countries, notably the US. The size difference notwithstanding, the Indian market—which is less than one–hundredth the size of the US market—has shown greater stability, with few rating downgrades, and zero losses on investor payouts. CRISIL believes that the relative stability is because of the superior profile of the assets securitised in India, and because the financial instruments created out of the securitised assets in India are far less complex than those in developed markets. Investors in securitised paper in India have no reason to fear crippling losses of the kind that have hit their US counterparts. The most significant factor characterising securitisation in India is the robustness of the underlying retail assets. Unlike in the US, there has been no securitisation of ‘sub-prime’ housing loans in India. The loans that have been securitised—principally loans for commercial vehicles, cars, two-wheelers, and (to a limited extent) homes—were made on the strength of the earning capacity of either the assets or the borrowers. Thus, unlike the US market which turned out to be vulnerable to residential property price movements, the securitisation market in India is relatively immune to asset price fluctuations. Moreover, although the collection behaviour of retail loans has worsened somewhat over the past two years, CRISIL has stipulated higher credit enhancement levels to counteract this trend. Recent car and commercial vehicle pools have had collections that are, on average, two percentage points lower than those on older pools at a similar stage in their life-cycle. Against this, on average, credit enhancement levels have risen by 2.5 to 4.5 percentage points, an increase of more than 50 per cent, over the past two years. According to Mr. Prasad Koparkar, Head, Structured Finance Ratings, CRISIL, “There will probably be more rating changes than before, but thanks to higher levels of credit enhancement, investors’ payouts are still well protected from default.” Reassuringly, despite a few rating downgrades in the past few months, the stability of CRISIL’s securitisation ratings is comparable to that of its other ratings. According to Mr Ajay Dwivedi, Director, Structured Finance Ratings, CRISIL, “From the highest rating of ‘AAA(so)’ for structured instruments, only about two per cent of instruments have been downgraded over a one- year timeframe. This is quite comparable with the behaviour of CRISIL’s ‘AAA’ ratings for other instruments.” Nevertheless, CRISIL continues its globally pioneering practice of differentiating its ratings for structured instruments from its ratings for other instruments, by using the ‘(so)’ suffix. Global regulators today are discussing a requirement to differentiate ratings on structured instruments from those on plain vanilla debt; the fact that CRISIL took this step more than a decade ago shows how transparent and market-friendly credit rating in India is. December 03, 2008 www.crisil.com 1
  2. 2. Media Contact Analytical Contacts CRISIL Rating Desk Tel: +91-22-6691 3047/6691 3064 Ramya Krishnan Anil Ajay Dwivedi Head, Market Development & Director, Structured Finance Email:CRISILratingdesk@crisil.com Communications Ratings – CRISIL Ratings CRISIL Tel: +91-22-6691 3097 Tel: +91-22-6758-8051 Email: adwivedi@crisil.com Mobile: +91 98203 42671 Facsimile: +91-22-6758-8088 Prasad Koparkar Email: RamyaKA@crisil.com Head, Structured Finance Ratings – CRISIL Ratings Tel: +91-22-6691 3137 Email: pkoparkar@crisil.com Note: This Press Release is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The press release may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution of its Releases for consideration or otherwise through any media including websites, portals etc. CRISIL is India's leading Ratings, Research, Risk and Policy Advisory company. CRISIL leverages its core strengths of credibility and analytical rigour to deliver opinions and solutions, that help clients mitigate and manage their business and financial risks, make markets function better, and help shape public policy. For more information, visit www.crisil.com Disclaimer: A CRISIL rating reflects CRISIL's current opinion on the likelihood of timely payment of the obligations under the rated instrument and does not constitute an audit of the rated entity by CRISIL. CRISIL ratings are based on information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the information on which the rating is based. A CRISIL rating is not a recommendation to buy, sell or hold the rated instrument; it does not comment on the market price or suitability for a particular investor. All CRISIL ratings are under surveillance. Ratings are revised as and when circumstances so warrant. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this product. For the latest rating information on any instrument of any company rated by CRISIL, please contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (+91 22) 6691 3001 - 09 December 03, 2008 www.crisil.com 2

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