Non-banking financial companies (NBFCs) drove India’s securitisation market to its strongest-ever first-quarter performance, with issuances rising 22 per cent year-on-year (Y-o-Y) to around ₹60,000 crore, according to Crisil Ratings.
More than 98 per cent of the volume originated from NBFCs, unlike previous peak periods when bank-originated transactions had also contributed significantly, the ratings agency said.
A notable shift in the asset mix saw gold loans emerge as the largest securitised asset class, overtaking vehicle loans. Gold loans accounted for around 31 per cent of total securitisation volume during the quarter, while the share of vehicle loans moderated to about 26 per cent following fewer issuances by a large originator.
The rise in gold loan securitisation, coupled with subdued activity by a large private bank that had undertaken significant retail mortgage-backed securitisation (MBS) issuances in the corresponding period last year, reduced the share of MBS transactions by 900 basis points Y-o-Y to 12 per cent.
Deepanshu Singla, director, Crisil Ratings, said: “The robust volume indicates NBFCs ramped up recourse to securitisation for raising funds amid sustained credit demand and healthy investor appetite for securitised assets. Specifically, gold loan financiers saw strong portfolio growth and used the direct assignment (DA) route to source funds. For investors, largely public-sector banks, the big draw was negligible historical credit losses in gold loans and risk-weight benefits.”
Securitisation of business loans also gained traction with its share rising 300 basis points to 10 per cent of total issuances. The increase was led by secured business loan pools, reflecting growing investor preference for collateral-backed assets.
Microfinance loans also witnessed recovery with improved portfolio performance and demand for priority-sector assets lifting their share of total securitisation volume by 300 basis points to 14 per cent during the quarter.
The changing composition of underlying assets altered the preferred mode of securitisation. Direct assignment transactions accounted for about 54 per cent of total issuances, driven largely by gold loans and secured business loans, which are predominantly executed through this route. Around 87 per cent of securitised gold loan transactions during the quarter were structured as direct assignments.
Consequently, the share of pass-through certificate (PTC) transactions declined to around 46 per cent from 58 per cent a year earlier.
Banks, including public-sector, private, and foreign lenders, remained the dominant investors, accounting for about 90 per cent of investments in securitised issuances during the quarter. Foreign banks and large NBFCs continued to invest in PTC transactions across asset classes, attracted by favourable risk-adjusted returns. Other investors included alternative investment funds, mutual funds, insurance companies, high-net-worth individuals, and family offices.
Payal Anand, associate director, Crisil Ratings, said: “We foresee the securitisation market maintaining its growth trajectory in the coming quarters, supported by healthy retail credit growth and increasing participation from originators across asset classes. The broadening participation of originators is evident in the number of unique ones accessing the securitisation market, rising to 115 in the first quarter of this financial year, compared with 90 in the same period last year. With deposit growth continuing to lag credit growth, banks, particularly those with higher credit-deposit ratios, are likely to evaluate securitisation as a strategic tool for funding.”
 "NBFCs drive securitisation issuances to record first-quarter high: Crisil")
