India's Securitisation Volume Rises by 27% in 9 Months, Fueled by Private Banks

Mumbai, Jan 8 (NationPress) The securitisation volume in India has jumped by around 27 percent year-on-year, amounting to Rs 1.78 lakh crore during the first nine months of this fiscal year. This growth has been significantly bolstered by major issuances from private sector banks, as highlighted in a recent CRISIL report published on Wednesday.

In terms of asset classes, vehicle loans (which include commercial vehicles and two-wheelers) represented a substantial 48 percent of the securitisation volume, compared to 40 percent in the same period of the previous fiscal year.

For the third quarter alone, issuances reached Rs 63,000 crore, marking a 60 percent increase year-on-year, with private sector banks accounting for 28 percent of this total.

Conversely, originations from non-banking financial companies (NBFCs) saw a modest rise of 5 percent. When adjusted for a large housing finance company that merged with a bank, the like-for-like growth for the nine months of this fiscal year is consistent with a slowdown in the assets under management (AUM) growth.

During this timeframe, approximately 15 new NBFC issuers emerged, increasing the total number of originators to 152, up from around 136 in the same period last fiscal year.

CRISIL Ratings director Aparna Kirubakaran noted, "Private sector banks with elevated credit-deposit ratios are likely to continue leveraging the securitisation route as an effective balance sheet management strategy, which will drive the securitisation market volume to unprecedented levels this fiscal year. In contrast, while volume growth for NBFCs remains subdued, we predict that more new entrants will join the market as smaller and mid-sized entities search for alternative funding solutions beyond traditional bank loans."

Ongoing strong volume growth in specific asset classes is ensuring that the market composition favors pass-through certificates (PTCs) over direct assignments (DAs). For the first nine months of this fiscal, PTC issuances comprised 57 percent of the total securitisation volume, with DAs making up the remaining 43 percent. PTC issuances more than doubled year-on-year, exceeding Rs 1 lakh crore in the first nine months, matching the total for the last fiscal year, the report indicates.

Following vehicle loans, mortgage-backed loans constituted around 23 percent of securitisation volume, up from 20 percent in the corresponding period last fiscal year. Securitisation tied to gold loans has rebounded after the lifting of regulatory restrictions affecting a major originator, with DAs remaining the preferred securitisation method for this asset class, as per the report.

The proportion of microfinance loans in securitisation fell to 11 percent (from 15 percent last fiscal year) as the sector continues to face asset-quality challenges. Meanwhile, the share of personal and business loans increased to approximately 16 percent (up from 14 percent) as more participants entered the securitisation market to secure funding.

While interest from newer classes of investors, including mutual funds, insurance companies, and alternative investment funds, is on the rise, banks continue to dominate the investor landscape, accounting for 70 percent of the securitisation volume.

Securitisation remains a compelling fundraising option for NBFCs in light of stricter lending regulations imposed on banks. With the sustained involvement of private banks in originations, the market is poised to reach record levels this fiscal year, the report concludes.