Mumbai: Global rating agency Moody's has said securitization is the key to solving the country's funding issues for the longer gestation sectors like housing and infrastructure.
"While the government has injected its own capital to support various reform initiatives, securitization could play a significant role by providing funds to finance development projects," Moody's Investors Service assistant vice president Georgina Lee said in a note on Wednesday.
The new government has identified housing, infrastructure and other urbanisation initiatives as key for pushing up the sagging economic growth.
Securitization can provide funds for real estate developers, project sponsors and retail loan providers, alleviating pressure on public finances and the banking system, she added.
Even though securitization activity was up 29 per cent in 2013-14 at Rs 49,000 crore, there has been volatility in the activity in the recent years on lack of clarity in regulation and taxation fronts, she noted.
Issues around regulation and taxation fronts directly impact the motivation levels of the originators and investors. Emergence of a broader set of investors is important for the development of the securitization market in the country, which will in turn fund the economy.
"...the existence of a diverse range of investor types is key to a deeper, more liquid market and better price discovery," the report said.
Till now, the market has been dominated by three asset classes, namely auto loan asset-backed securities (ABS), residential mortgage-backed securities (RMBS) and micro loan ABS, it said, adding that the commercial mortgage backed securities market, which saw three deals in 2014, is also emerging.
The delinquencies in commercial vehicle ABS category are relatively higher for more recent vintages, owing to a stressed operating environment for transport operators, she said.
RMBS and micro-loan ABS are among the better performing ones, it said, adding that RMBS loans from certain regions exhibit higher delinquency rates than others.