RMBS to help revive mortgage loan pools: Ind-Ra
The formation of RMBS Development Co will help revive mortgage loans as a securitisation asset class, India Ratings and Research said in a report on Tuesday. The National Housing Bank, in collaboration with the Reserve Bank of India, recently set up the entity to promote the residential mortgage-backed securities (RMBS) market.
The rating agency expects the securitisation market to reach an all-time high in 2024-25 owing to a favourable macroeconomic environment and strong consumer sentiment.
“Unsecured consumer loan growth continues at a steady pace despite regulatory headwinds. Investors continue to show interest in unsecured asset classes, given the availability of mitigants to combat the risk,” the rating agency said. Average delinquencies in unsecured consumer loan pools are likely to remain on expected lines.
The agency contends there is an increased adoption of replenishment structure in assets with tenures ranging from two to five years, as originators and investors seek long-term exposure.
Also, the uncertainty around the direction of the interest rate movement has resulted in transactions with floating interest rate liability, even in cases where the pool yield is fixed. “New sub-asset class such as electrical vehicle may see participation in the securitised vehicle loan pools over the near term. The performance and recoveries of such sub segments would be monitorable,” India Ratings said.
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