 "Bank loans")
The securitisation of loans especially by finance firms and housing finance firms rose 41 per cent year on year (YoY) to Rs 1.78 trillion in the year ended March 2023 (FY23) to manage funding to meet growing credit demand.
According to data from rating agency Icra, lenders had sold down loans of about Rs 1.26 trillion in the previous year ended March 2022 (FY22). However, securitisation activity, also known as pooling of loans to repackage them into securities for sale to investors, was still below pre-pandemic level of Rs 1.98 trillion in FY20.
Icra said in a statement that securitisation is expected to remain buoyant in FY24 as well. However, overall volumes could decline by 15-20 per cent due to the impending merger of a large HFC with a bank that is unlikely to engage in loan sell-downs, Icra said in a statement.
The country's largest mortgage company, Housing Development Finance Corporation (HDFC), will merge with the largest private lender, HDFC Bank, in FY24.
Securitisation is done either through direct assignment (DA) transactions (bilateral assignment of pool of retail loans from one entity to another) or through the pass-through certificate (PTC) route (instruments issued by bankruptcy remote trusts).
Also Read
Healthy credit growth of non-banking finance companies (NBFCs) and HFCs led to the highest post-pandemic quarterly securitisation level in Q4FY23, estimated at Rs 61,000 crore. The second highest level was Rs 52,000 crore in Q4FY22, Icra data showed.
Abhishek Dafria, Vice President and Group Head–Structured Finance Ratings at Icra, said the upward trend in the securitisation values continued for another quarter as NBFCs and HFCs saw an increase in funding requirements to meet the growing credit demand.
Rising interest rates over the past year have not yet materially dampened credit demand. With the Monetary Policy Committee (MPC) keeping the repo rate unchanged in April, the disbursement trends for NBFCs and HFCs is likely to remain healthy in the near term. This will support the growth in the securitisation market across asset classes.
Nonetheless, the macro-economic conditions remain a monitorable as global economies continue to manage high inflationary pressures.
In FY23, mortgage-backed loans formed the biggest chunk of the overall volumes, at about 33 per cent. This was followed by vehicle loans at 28 per cent. Microfinance loans have made a huge comeback accounting for about 18 per cent in FY23. The share of PTC was 40 per cent in retail securitisation which is largely in line with historical trends. Securitisation of personal loans remained strong throughout the year accounting for three per cent of the total value.
