Securitisation volumes see a slump sequentially in Q4FY25, says ICRA

Securitisation – sale of loans to investors – by lenders, including banks and non-banking financial companies (NBFCs), crossed ₹50,000 crore during the fourth quarter ended March 2025 (Q4F25). This is a tad higher than ₹48,000 crore during the same period of FY24.

 

However, sequentially, securitisation volumes declined substantially from about ₹69,000 crore each in the second and third quarters of FY25, according to rating agency ICRA.

 

The sequential decline reflected part of an improvement in liquidity conditions.

 

A few players, including private banks, who securitised higher volumes in Q2 & Q3, were less active in the final quarter of the financial year, analysts and bankers said.

 

Securitisation involves pooling similar assets, such as mortgages, auto loans, or credit card debt, and then repackaging them into securities like pass through certificates (PTCs).

 

The loans are also sold through direct assignment.

 

The lenders, especially banks, buy a pool of loans to meet priority sector lending norms.

 

ICRA data showed that securitisation volumes were about ₹2.35 trillion for financial year FY25, up from ₹1.9 trillion in FY24.

 

Sachin Joglekar, group co-head of structured finance ratings, ICRA, said there was sluggishness in loan disbursements among NBFCs in microfinance and other unsecured asset classes in the fourth quarter. 

 

Private sector banks continued to sell part of their credit portfolio through securitisation to lower their credit-to-deposit ratios.

 

The country’s largest private sector bank, HDFC Bank, was less active in selling loans in the market during the fourth quarter.

 

The bank has securitised ₹10,700 crore of loans in Q4 and ₹57,000 crore in FY25, according to a filing with the BSE.

 

Going by the securitisation volumes for small and medium NBFCs in FY24, microfinance (MF) and micro, small and medium enterprises (MSMEs) account for a significant share of the total securitisation. This indicates that NBFCs, with a portfolio of mainly unsecured or low-ticket asset classes, rely more on securitisation for their funding.

 

ICRA, in its review of securitisation by NBFCs in March 2025, had said securitisation volumes for medium and small sized NBFCs are expected to decline in the current financial year.

 

This was due to de-growth in disbursements amid ongoing headwinds, especially in the unsecured asset class.

 

Their share in overall securitisation remains low due to limited investor appetite with the perceived servicer risk being higher than bigger NBFCs, bankers said.