Securitisation volumes, which dipped about 7.5 per cent to ?95,000 crore in fiscal 2018 after two years of robust growth in FY16 and FY17, are likely to get a leg up with the GST Council’s clarification that securitised assets are not liable to Goods and Services Tax (GST), according to a report from Crisil Ratings.

The rating agency also expects that robust demand for non-priority sector lending (PSL) securitisation should bring back participants and support transaction volumes after the deceleration seen last fiscal.

It noted that some frequent issuers have been staying away from the market because of ambiguity on GST applicability.

Crisil Ratings said that a host of other headwinds also coalesced, such as the widespread adoption of priority sector lending certificates (PSLCs) - which increased to 1.86 lakh crore in FY18 from a little under ?50,000 crore in FY17 - and hardening of interest rates towards the fiscal end.

Still, strong demand for non-PSL assets helped. Both public sector banks and the newer non-bank investors (mutual funds, non-bank treasuries, foreign portfolio investors and insurers), with differing risk appetites and return aspirations, chased non-PSL-compliant asset classes. Demand for non-PSL mortgage receivables was primarily from public sector banks, whereas demand for non-PSL vehicle loan securitisation originated from mutual funds and insurers, said Crisil.

Transactions backed by education loan receivables and consumer durables loan receivables debuted during the year, and transactions backed by personal loan receivables returned after several years. Although these account for a small volume, demonstrated investor interest in them improves the long-term prospects of the securitisation market, according to Crisil.

PSL assets securitisation will continue to be the mainstay due to demand from banks which are averse to depending exclusively on PSLCs (because of the ’expense’ nature of these papers and pricing volatility) to meet their mandated lending goals.