Private lenders securitise loans worth Rs 21,000 crore in Q2 FY25

Private sector banks offloaded loans worth Rs 21,000 crore through securitisation deals in the second quarter ended September 2024 (Q2 FY25) to generate funds amid intense competition for deposits. This will also help to improve the credit-deposit (C/D) ratio, according to the ratings agency ICRA. The Reserve Bank of India (RBI) had earlier expressed concern over the high C/D ratio for some lenders and sought a review of business models.

Abhishek Dafria, group head, structured finance, ICRA, said the securitisation market—pass-through certificates (PTCs) plus assignment—witnessed an extraordinary quarter in Q2 FY25, with volumes touching Rs 60,000 crore. About 35 per cent of the volumes originated from private sector banks, which have dived into the securitisation market to improve their credit-deposit ratio given the relatively slower pace of deposit accretion, he added.

The country’s largest private lender, HDFC Bank, securitised new car loans worth Rs 9,063 crore through a PTC transaction where mutual funds were key investors. India Ratings has assigned an "AAA" rating to this asset-backed securities transaction.

"Regular issuances by large institutions will provide a fillip to the securitisation market, boost investor confidence—including that of foreign portfolio investors—while proactive regulatory guardrails will ensure financial market stability,” said Jatin Nanaware, senior director, India Ratings.

Besides banks, ICRA said non-banking finance companies (NBFCs) and housing finance companies (HFCs) would also continue to raise funding through securitisation as they diversify their borrowing liabilities and improve their asset-liability management (ALM). The sustenance of volume growth in the coming quarters, however, remains to be seen, given the appetite for large-size transactions, as seen in Q2, may be limited. The securitisation volumes may reach Rs 2.1 trillion in the current financial year (FY25), Dafria of ICRA said.

HDFC Bank securitised Rs 19,200 crore of loans as a strategic initiative to lower its high credit to deposit ratio (CD ratio).