India’s Securitization Market Grows to Rs 45,000 Crore in First Quarter of 2024
The securitization market in India saw significant growth, reaching around Rs 45,000 crore in the first quarter of 2024, according to a report by Crisil. This marks a 17% increase compared to the previous year, demonstrating the market’s resilience despite challenges such as the exit of a major Housing Finance Company and regulatory measures affecting gold loan securitization.
Over 95 originators, including Non-Banking Financial Companies (NBFCs) and banks, actively participated in the market, highlighting a trend towards diversifying funding sources. Securitization involves pooling and selling income-generating assets to a third party, who then uses them as collateral to issue securities sold in financial markets.
Banks emerged as key players, with transaction volumes reaching approximately Rs 8,500 crore in the first quarter alone, surpassing the total for the entire fiscal year 2024. Ajit Velonie, Senior Director at CRISIL Ratings, noted that resource diversification is now a key agenda for both NBFCs and banks. With banks maintaining higher risk weights on credit exposure to NBFCs, securing bank funding at optimal costs has become crucial, prompting NBFCs to explore alternative resource-raising avenues.
The composition of asset classes in securitization also shifted, with vehicle loan securitization rising to 41% and mortgage-backed securitization declining to 25%. Microfinance accounted for 14%, while other asset classes like personal and business loans increased their share. Pass-through certificates (PTCs) dominated the market with a 53% share, especially in vehicle and personal loan securitization, while direct assignments (DAs) were common in mortgage, microfinance, and business loan securitization.
Overall, the securitization market remains a crucial funding source, with banks retaining a significant market share. The outlook is optimistic, with expectations of continued growth and potential record highs in the fiscal year.