Securitisation in personal loan segment may see temporary pause: ICRA

The sale of personal loan retail pools may see a temporary pause after the RBI's decision to increase the risk weights on unsecured asset classes of banks and non-banking financial companies (NBFCs) by 25 per cent, a report said.

The sale of personal loan pools by NBFCs amounted to about Rs 1,150 crore in FY 2023 and had already crossed Rs 800 crore in H1 FY2024 (i.e. 4x of the volumes done in H1 FY2023), Icra said in a statement.

Such transactions had picked up momentum, given the growing financing requirements for the NBFCs to meet the strong credit demand for consumer and personal loans in the country, coupled with the growing appetite for personal loan asset class by the banks that were purchasing these loan pools, it said.

The rating agency expects the pace of personal loan sell-downs to taper at least in the near term, following the increase in capital requirements on such loans for the purchasing banks, which would, thereby, augment the costs for all parties.

While securitisation in the personal and consumer loan category could see some slowdown for the interim period, the report, however, does not foresee any material impact on the overall domestic securitisation volumes as this asset class forms only about 3 per cent of the total securitisation volumes.