Non-mortgage security receipts formed 90% of the fresh issuances in 2023: India Ratings

economictimes.indiatimes.com:

Non-mortgage security receipts formed 90% of the fresh issuances in 2023, and have seen a rise in volumes backed by retail non mortgage bad loans, research by India Ratings showed.
Asset Restructuring Companies (ARCs) will have to scale up their recovery infrastructure to be able to deal with the change in dynamics. The ratings agency expects a sustained flow of unsecured asset classes being assigned to ARCs, particularly within segments such as personal and credit card loans.

Recoveries of bad loans that are backed by large corporates and small and medium enterprises are still stretched despite improvements in legal resolutions.

«We expect to see continued diversification in retail non performing loan (NPL) asset classes owing to the ongoing credit growth in retail loans. ARCs are vigilant of evolving dynamics of the NPL landscape and actively adapting and re-aligning their strategies to the changing nature,” said Jatin Nanaware, Senior Director, India Ratings. “Furthermore, the anticipated reforms in recovery laws are expected to bring a paradigm shift in the NPL recovery landscape.”

An emerging structure in the transactions backed by security receipts is that the pool of bad loans may include secured retail loans along with large corporation loans, the report said.
In non-mortgage NPL transactions, emerging structures are likely to incentivise servicers to speed up the recoveries, leading them to maximise their recovery efforts.