Loan securitisation volumes, originated primarily by non-banking financial companies (NBFCs) and housing finance companies (HFCs), are expected to be 60 per cent higher YoY at ₹53,000 crore in Q1 FY24, compared with ₹33,000 crore a year ago, according to ICRA Ratings.
In Q1, mortgage-backed loans accounted for one-third of total volumes, with Housing Development Finance Corporation continuing its run as the largest originator.
Securitisation volumes, combining both direct assignments and pass-through certificates (PTCs), have seen a healthy recovery post the pandemic, registering volumes of ₹1.8-lakh crore in FY23 – close to the pre-pandemic numbers.
“The buoyancy in the securitisation market has continued in the first quarter of the current fiscal. Despite the rise in interest rates over the past year, the retail credit demand in the country remained strong, resulting in increased financing requirements for the NBFCs and HFCs,” said Abhishek Dafria, Senior Vice-President and Group Head, Structured Finance Ratings, ICRA, adding that lenders too continue to depend on securitisation as a means to raise funds and diversify their fund-raising.
The exit of the top originator HDFC from the market, following its merger with HDFC Bank effective July 1, is likely to impact volumes. The share of mortgage-backed loans, which historically account for the largest share of securitisation volumes at 30-40 per cent, is seen falling to 20-25 per cent.
Vehicle loans
The second largest segment, vehicle loans, is then expected to become the largest asset class in the securitisation as strong construction and mining activities would drive loan volume growth in the near term.
ICRA expects the overall market to grow to ₹1.9-lakh crore in FY24, driven by increase in volumes from existing originators and emergence of new originators.