BFCs, HFCs Securitisation Volumes Increases At Rs 61,000 Cr

Securitisation volumes, originated largely by non-banking financial companies (NBFCs) and housing finance companies (HFCs), stood at Rs 61,000 crore in Q4 FY2023, the highest quarterly volumes seen since the onset of the Covid-19 pandemic, a report said on Tuesday. 

The volumes for the quarter are largely dominated by securitisation of retail loans (90 per cent). The overall securitisation volumes in FY2023 stood at Rs 1,78,000 crore, a healthy 41 per cent expansion over Rs 1,26,000 crore seen in FY2022.

“The upward trend in the securitisation volumes continued for another quarter as NBFCs and HFCs witnessed an increase in funding requirements to meet the growing credit demand.  Abhishek Dafria, Vice President and Group Head – Structured Finance Ratings at Icra said: Overall securitisation volumes for FY2023 remained marginally higher at Rs 1.8 trillion than our earlier estimates of Rs 1.7 trillion. The rising interest rates over the past year have not yet materially dampened the demand for credit. With the Monetary Policy Committee (MPC) keeping the repo rate unchanged in the recent meeting, we expect the disbursement trends for NBFCs and HFCs to remain healthy over the near term, which will support the growth of the securitisation market across all asset classes. Nonetheless, the macro-economic conditions remain monitorable as global economies continue to manage high inflationary pressures.”

The largest portion of the total volumes in FY2023, at 33 per cent, was made up of mortgage-backed (MBS) loans, followed by auto loans, at 28 per cent. Microfinance loans have made a huge comeback, accounting for 20 per cent and 18 per cent of Q4 FY2023 and full year FY2023 volumes, respectively. 

Securitisation is carried out 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). 

The percentage of PTC in retail securitisation in FY2023, which was 40 per cent, is largely consistent with historical trends.

Securitisation of personal loans has remained strong throughout the year accounting for 3 per cent of the total volumes.