Securitisation volume rose to Rs 45,000 crore in the first quarter of the current fiscal, marking a 17% on-year, like-to-like growth (adjusted for the exit of a large HFC and regulatory measures on gold loan securitisation). Over 95 originators, including NBFCs and banks, tapped the market to diversify funding sources, compared with 80 last fiscal.
Banks were also more active in the market as originators, with transaction volumes reaching Rs 8,500 crore in the first quarter itself against Rs 10,000 crore for the entire fiscal 2024.
Ajit Velonie, Senior Director, CRISIL Ratings, said, “Resource diversification is now a key agenda for NBFCs as well as banks. With banks now maintaining higher risk weights on credit exposure to NBFCs, availability of bank funding at optimal cost will be a key monitorable for NBFCs, making it imperative for them to diversify their resource raising beyond bank loans. On the other hand, banks – especially private sector banks – have high credit-deposit ratios and are looking at alternative sources of funding, including securitisation.”
Asset classes
In terms of asset classes, the share of vehicle loan securitisation (including commercial vehicles and two-wheelers) in overall first-quarter volume surged 400 basis points (bps) year-on-year to 41%, with continuing credit growth momentum among top NBFC originators. Share of mortgage-backed securitisation fell 900 bps to 25% in line with the HFC exit, and regulatory measures on gold loan securitisation led to their share falling to negligible levels compared with 7% in the first quarter of last fiscal.
Microfinance accounted for 14% against 10%, and other asset classes increased their share significantly by 800 bps to 20%. These consisted of personal loan (11%) and business loan securitisation (9%).
Among the two routes of securitisation, pass-through certificates (PTCs) accounted for a higher share of ~53%against direct assignments (DAs) at 47%. While PTCs dominated vehicle and personal loan securitisation, DAs accounted for majority of mortgage, microfinance, and business loan securitisation.
Banks continue to be the major investors with over 90% market share in the overall securitisation market. While public sector banks increased their investment activity last quarter through acquisition of retail DA pools to grow their loan books, private and foreign banks predominantly invested in PTCs. NBFCs and other investors such as alternative investment funds, insurers and high networth individuals/family offices made up the rest.
The current market landscape is also influenced by increasing bank originations, which accounted for around a fifth of the overall securitisation volume. For instance, large assignments by a private sector bank helped offset the expected impact on mortgage DA volume due to the HFC exit. PTCs originated by another private sector bank supported the rise in share of personal loan securitisation in the market by 700 bps.
Overall, the securitisation market remains an efficient alternative funding avenue for financiers. CRISIL said it expected more banks and NBFCs to tap the market and meet their diversification needs which in turn could lead to the market reaching all-time highs this fiscal.
