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Part - III
The number of NBFCs that have resorted to securitization
has also gone up significantly from two* in FY2000-01 to
six in FY2002-03. CRISIL has rated the securitization
programmes of two more NBFCs in FY2003-04, taking the
total number of NBFCs with outstanding securitized debt
ratings to eight.
CRISIL estimates that securitization issuances as a
percentage of auto finance disbursements rose sharply from
2.3 per cent in FY2000-01 to 13.3 per cent in FY2002-03
and will touch an estimated 16.6 per cent in 2003-04**.
For NBFCs that use it, securitization accounts for around
26 per cent of their funding on an average. Going forward,
CRISIL believes that access to varied funding sources at
competitive rates will be critical for NBFCs to sustain the
current strengthening of their business model.
Falling interest rates and lower spreads diminish
banks’ resources advantage
In the past, banks have enjoyed an inherent advantage
over NBFCs in terms of raising term deposits at relatively
lower costs and raising resources through savings and current
accounts. The southward movement in interest rates since
FY1998-99 has had a twofold impact on a bank’s cost
metrics. Not only has the benefit from low-cost current
and saving accounts declined but the spreads on their
investments in G-Secs vis-à-vis their cost of term deposits
has also declined.
A flavour of numbers indicates that the cost of term
deposits has declined sharply by about 525 bps***, over
time (since 1999-00) in line with the declining trend in
the yield on G-Secs, while the yield on G-Secs has declined
even more by over 650 bps. The interest on savings
accounts has, however, fallen by only 150 bps in the same
period. CRISIL believes that this has reduced the benefit
that banks enjoyed by virtue of having access to current
and savings accounts by 147 bps (denoted as XX). Of this,
94 bps is because of a reduced benefit from savings
accounts while 53 bps emanates from current accounts (see
Table #1).
Table 1
Movement in cost differentials between term deposits
and current and savings accounts (CASA)****
| |
Current |
Savings |
| Proportion of total deposits# (A) |
10.00% |
25.00% |
| Earlier## cost (B) |
0.00% |
4.50% |
| Present### cost (C) |
0.00% |
3.00% |
| Earlier cost of term deposit (D) |
10.50% |
10.50% |
| Present cost of term deposit (E) |
5.25% |
5.25% |
Earlier CASA benefits vis-à-vis
term deposits (F=D-B) |
10.50% |
6.00% |
Present CASA benefits vis-à-vis
term deposits (G=E-C) |
5.25% |
2.25% |
| Decline in benefit (H=F-C) |
5.25% |
3.75% |
Effective decline in
CASA benefits (I=A*H) |
0.53% |
0.94% |
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* This refers to the number of NBFCs whose securitization programmes
were rated by CRISIL
** Refer to CRISIL’s opinion piece, The Indian Auto Loan Securitization
Market - Geared for Growth
*** 1 bp (basis point) = 0.01%
**** Estimate of cost of deposits is on an incremental basis
# CRISIL estimates for the banking system
## CRISIL’s estimates of levels in 1999-2000
### CRISIL’s estimates of existing levels
Source: CRISIL
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