Securitisation volumes grew 4% to ₹1.88lakh crore in FY24, says ICRA

The overall securitisation volumes for FY24 grew 4 per cent yearonyear (yoy) to ₹1.88lakh crore despite the exit of the previous year’s largest originator — HDFC — following its merger with HDFC Bank, according to ICRA.

The securitisation volumes are projected to comfortably cross ₹2lakh crore in FY25 due to an increase in participation by banks as originators.

The rating agency noted that securitisation volumes in Q4 (JanuaryMarch) FY24 witnessed a healthy growth of 26 per cent over the preceding quarter, rising to ₹48,000 crore.

Nonetheless, the volumes were much lower compared to Q4 FY23, when securitisation had touched ₹63,000 crore; 10 per cent of the latter in volume terms was attributed to wholesale loan securitisation, that has not been repeated subsequently, it added.

HIGHER DEMAND

The agency opined that continued growth of the securitisation market for the last four fiscal years in a row (post Covid period) reflects the high retail credit demand in the country being catered to by the nonbanking financial companies (NBFCs) and the housing finance companies (HFCs), increased reliance on securitisation by the originators as a funding tool, and growing investor base.

Abhishek Dafria, Senior VicePresident and Group Head, Structured Finance Ratings, at ICRA, said: “We witnessed a sharp increase in securitisation by small finance banks as well as initial steps taken by a few private sector banks in this space to support their portfolio growth, given the recent challenges in deposit growth rates. If similar trends continue, ICRA projects the volumes to comfortably cross ₹2lakh crore in FY25.”

Nonetheless, the increasing share of colending by the NBFCs and HFCs would challenge the growth in the securitisation market, though at this juncture ICRA expects an increase in both forms of funding, he said.

Vehicle loans continue to form the biggest asset class in PTC issuances, whereas microfinance and mortgage loans are largely securitised through the DAs.

“Small business loans and personal loans have been consistently increasing their participation in the market, while the current proportion remains relatively lower in the overall volumes,” per the agency.