Securitisation of loans by SFBs to cross Rs 10,000 cr in FY2024: ICRA

Fundraising by small finance banks (SFBs) through securitisation is expected to exceed Rs 10,000 crore in FY2024 against Rs 6,400 crore in the previous year, rating agency ICRA said on Tuesday.

The third quarter of FY2024 alone witnessed the quarterly record high securitisation volumes of about Rs 4,200 crore, ICRA said in a release.

"The market share of SFBs in the securitisation market would accordingly touch a peak of 6 per cent in FY2024 from levels of sub-2 per cent prior to FY2022," it said.

In FY2024, ICRA said six SFBs raised funds through this route against four in FY2023 and only two in FY2022.

"The increase in the number of SFBs securitising their assets signals a deepening of the domestic securitisation market, as it provides them an alternative route to raise funds to sustain their growth momentum," it said.

Abhishek Dafria, Senior Vice President and Group Head - Structured Finance Ratings at ICRA said the securitisation market has traditionally been dominated by non-banking financial companies and housing finance companies acting as originators and thus the emergence of SFBs has helped in expanding the market.

"The SFBs are witnessing healthy growth in their gross advances at around 24-25 per cent, which is likely to continue in the near term, given the strong credit appetite in the country," he said.

While deposits continue to be a significant share of the overall funding mix, the SFBs have increased the share of securitisation in FY2023 and YTD FY2024 as a means to diversify their funding mix, he added.

"Further, with increased competition for deposit mobilisation as well as slowing deposit growth, ICRA expects them to continue to increase their securitisation volumes in the near term," Dafria said.

The overall domestic securitisation market has seen strong growth in recent years and is estimated to be around Rs 1.9 - 2 lakh crore for FY2024 compared to Rs 1.8 lakh crore in FY2023, supported by high funding needs for the originators, coupled with the increase in both originators and investors in the securitisation market, ICRA said.