Banks Emerge As Originators As Securitisation Volumes Hit Rs 45,000 Cr In Q1FY25: Crisil

With banks showcasing more active participation as originators, India’s securitisation volumes rose to Rs 45,000 crore in the first quarter of the current fiscal year, as per the report by Crisil ratings. Even after the exit of a large Housing Finance Company (HFC), the market registered an adjusted Year-on-Year (YoY) growth of 17 per cent. Over 95 originators tapped the market to diversify funding sources as compared to 80 originators in the last fiscal.

The current market is influenced by increasing bank originators which accounted for around one-fifth of the overall securitisation volume. The transaction volumes reached Rs 8,500 crore in Q1FY25 as compared to Rs 10,000 crore for the entire fiscal 2024, owning to banks getting more involved in the market as originators. Banks hold the 90 per cent market share in the segment as they remain major investors.

Pass-through certificates (PTCs) amounted to the highest share at 53 per cent followed by direct assignments (DAs) at 47 per cent. The PTCs dominated vehicle and personal loan securitisation, DAs contributed to the majority of mortgage, microfinance, and business loan securitisation. While the public sector banks acquired retail DA pools to grow their loan books, private and foreign banks invested in PTCs.

“Resource diversification is now a key agenda for Non-banking Financial Companies (NBFCs) as well as banks. Banks, especially private sector banks, have high credit-deposit ratios and are looking at alternative sources of funding, including securitisation,” said Ajit Velonie, Senior Director, Crisil Ratings.

Recently, Icra, in its report, highlighted the role of banks emerging as originators in the Indian securitisation market. Icra report indicated a possibility of the securitisation market touching the Rs 2 trillion mark by the end of the current financial year.

“The securitisation market continues to widen with new originators, even from the banking sector, raising funds through this route in the quarter, which bodes well for the industry’s long-term growth. We expect securitisation volumes to pick up in subsequent quarters boosting annual volumes above Rs 2 trillion in FY2025,” according to Abhishek Dafria, Senior Vice President and Group Head, structured finance ratings at Icra.

As per Crisil, the securitisation market remains an efficient alternative funding avenue for financiers. More banks and NBFCs are expected to tap the market and meet their diversification needs.