Securitisation Volume Rose 17% To Rs 45,000 Crore In Q1 Of Fiscal 2025: Crisil

Securitisation volume rose 17% in the first quarter of the current financial year, increasing by a value of Rs 45,000 crore, according to a report by Crisil Ratings.

There were 15 more non-banking financial companies and banks capitalising the markets, with over 95 originators compared to last fiscal's 80.

Banks were also more involved in the market as originators, with transaction volume reaching approximately Rs 8,500 crore in the first quarter alone, as compared to around Rs 10,000 crore for the entire fiscal 2024.

“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 ones—have high credit-deposit ratios and are looking at alternative sources of funding, including securitisation," Ajit Velonie, senior director at CRISIL Ratings, said.

Microfinance represented approximately 14%, up from 10%, while other asset classes saw a significant increase to around 20%, up by 800 basis points. This included personal loans at 11% and business loan securitisation of 9%.

Pass-through certificates held a higher share at approximately 53%, compared to direct assignments at around 47%. PTCs were dominant in vehicle and personal loan securitisation, whereas direct assignments were predominantly used in mortgage, microfinance, and business loan securitisation.

Banks maintain their dominant position as major investors, holding over 90% market share in the securitisation market overall.

Public sector banks boosted their investment activity last quarter by acquiring retail direct assignment pools to expand their loan portfolios, while private and foreign banks primarily focused on investing in PTCs.

NBFCs and other investors, including alternative investment funds, insurers, and high net worth individuals/family offices, accounted for the remaining share.

The current market trends are also shaped by growing involvement from banks, which accounted for about 20% of the total securitisation volume.

For example, significant contributions from a private sector bank helped offset the anticipated decrease in mortgage direct assignments following the exit of a housing finance company.

Additionally, PTCs issued by another private sector bank contributed to a 7% increase in the share of personal loan securitisation in the market.

"Overall, the securitisation market remains an efficient alternative funding avenue for financiers. We expect 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," the report said.