India's securitisation market demonstrated structural resilience in FY26, even as retail transaction volumes moderated by approximately 6 per cent to ₹2.53 lakh crore, according to a report released on Friday, 29 May by CareEdge Ratings. The broader market, when wholesale loan pass-through certificates (PTCs) were included, recorded a 1 per cent expansion, signalling that the overall ecosystem remained on a growth footing.

Key Structural Drivers

The CareEdge report identified several foundational pillars sustaining market activity. Priority Sector Lending (PSL) guidelines continued to provide regulatory support, while originators benefited from improved scalability and the ability to selectively securitise high-quality asset pools. The historically resilient performance of securitised pools further underpinned investor confidence.

Notably, Timely Interest and Ultimate Principal (TIUP) structures dominated the market, accounting for nearly 82 per cent of total volumes — a concentration that reflects investor preference for predictable cash-flow structures over riskier alternatives.

Segment Performance

Vehicle loan pools retained their leadership position in PTC issuances, while mortgage-backed pools led direct assignment activity. The Residential Mortgage-Backed Security (RMBS) segment, according to the report, continues to represent significant untapped potential — a recurring observation that points to structural underdevelopment relative to peer markets.

PTC volumes backed by microfinance institution (MFI) loans witnessed an uptick, reflecting shifting investor preferences amid ongoing sectoral uncertainties in the unsecured lending space.

Credit Performance and Downgrades

'The performance of retail PTCs has remained broadly stable over the long term, with low levels of credit loss observed since 2010,' said Mehul Pandya, Managing Director and Group CEO of CareEdge.

However, Pandya also acknowledged that the broader market witnessed downgrades, largely concentrated in microfinance and unsecured business loan pools — segments that have faced mounting stress as borrower repayment capacity came under pressure in recent quarters. This is consistent with wider trends in India's unsecured retail credit landscape, where delinquency rates have edged higher across multiple lenders.

Headwinds and the Road Ahead

Declining PSL premiums, stress in unsecured lending, and broader external uncertainties have moderated appetite in select segments. The CareEdge report cautioned that the growth of the overall market will depend on deeper participation from large originators, stronger institutional investor engagement, and the development of a more active secondary market.

Improved disclosure standards, standardised reporting frameworks, and wider market participation are cited as the key enablers for the sector's next phase of expansion. The ratings agency maintained a constructive outlook, arguing that structural strengths outweigh near-term headwinds.