Crisil downgrades ICICI Bank’s securitized car and personal loan pool

There has been rise in the number of defaults on payments by borrowers therefore the rating agency Crisil has downgraded ICICI Bank’s securitized car and personal loan pool worth over Rs 203 crore from AAA (so) to AA (so).

In 12 months the negligence levels for the loan pool since securitization has gone up than expected, with collections significantly going down below expectations.

Crisil in its report said this has led to the rating revision for pass through certificates (PTCs) series A13 (Rs 105.73 crore) and A14 (Rs 98.2 crore).

Prasad Koparkar, head of structured finance rating with Crisil, said there has been no default in payment to PTC investors. There are enough credit development cushions for payment to investors in securities.

For instance while securitizing loans, the cushion will be in multiple of expected defaults rate. He added for Rs 100 crore loan pools if the expected default rate is Rs 5 crore, then the credit enhancement will be three-four times the default rate.

There is no need to panic as the rise in default of personal and vehicle loans extended by banking and financial entities is on expected lines. When banks will move away from the saturated safe loan market, the default rate is set to go up, as they are persuading the relatively higher risk segment (self employed). But these segments of loans also carry higher interest rates — reflecting risks and higher transaction costs.

All the PTCs are backed by a pool of new car and personal loan receivables created and serviced by ICICI Bank. The rating outfit reaffirmed the outstanding ratings on 16 other PTCs. The reaffirmed papers carry AAA (So) rating.