SFBs securitise loans worth Rs 9,300 crore to generate liquidity

The securitisation volumes in Q4 FY24 witnessed healthy growth of 26 per cent over the preceding quarter, rising to Rs 48,000 crore

With intense competition for resources, small finance banks (SFBs) sold loans worth Rs 9,300 crore through securitisation in Fy24, up from about Rs 6,400 crore in Fy23 to generate liquidity for business operations, according to ICRA data.

Abhishek Dafria, Group Head, Structured Finance Ratings, ICRA, said there was a sharp increase in securitisation by small finance banks and by few private sector banks to support their portfolio growth, given the recent challenges in deposit growth rates.

The share of SFB originated loans had crossed 10 per cent of the overall market volumes for the first time inQ3FY2024. Given the high credit growth and comparatively higher cost of deposits, they will continue to rely on securitisation as a source of fund-raising, the rating agency added.

According to ICRA’s estimates, the overall securitisation volumes originated mainly by financial institutions, stood at Rs 1.88 trillion in Fy24. This was four per cent year-on-year (Y-o-Y) growth despite the exit of previous year’s largest originator mortgage lender HDFC, following the entity’s merger with a bank.

The securitisation volumes in Q4 FY24 witnessed a healthy growth of 26 per cent over the preceding quarter, rising to Rs Rs 48,000 crore. Nonetheless, the volumes were much lower compared to Q4 FY23, when securitisation had touched Rs 63,000 crore, it said.

The growth of the securitisation market reflects the high retail credit demand catered by the finance companies and the housing finance companies (HFCs), increased reliance on securitisation by the originators as a funding tool, and growing investor base.