Securitisation Modestly Declines To Rs 38,000 Cr In Q3 FY24: Icra
The overall securitisation volumes, originated mainly by non-banking financial companies (NBFCs) and housing finance companies (HFCs), stood at Rs 38,000 crore in third quarter of financial year 2023-24 (Q3 FY24), reflecting a sequential de-growth of around 17 per cent from Rs 46,000 crore recorded in Q2 FY24, suggests Icra’s estimates.
The volumes for Q3 FY24 have also trailed around Rs 43,000 crore securitised in Q3 FY23, mainly due to the exit of a large HFC from the securitisation market in the current fiscal, the estimates highlight.
Icra expects securitisation activity to pick up again and touch Rs 50,000 crore in Q4 FY24, which is typically the busiest quarter of the year.
Abhishek Dafria, Senior Vice President and Group Head, Structured Finance Ratings, Icra said, “The securitisation volumes in Q3 FY24 failed to maintain the growth momentum witnessed in several recent quarters. Icra believes that the RBI’s move to increase the capital requirements of lending institutions towards consumer credit, vide its circular in November 2023, affected the securitisation volumes for mainly unsecured loans to some extent as the banks and NBFCs formalised their internal policies."
He further mentioned that some securitisation deals did not fructify as the originators are expecting reduction in the interest rates in the near term
The securitisation market has witnessed a higher share of pass-through certificates issuances vis-à-vis direct assignments, following the exit of a large HFC this year, which had been securitising its assets predominantly through direct assignments.
Vehicle loans continue to be the largest asset class with 35 to 40 per cent share in the overall securitisation volumes, followed by microfinance loans with 22 to 25 per cent share.
Mortgage-backed loans have a share of 18 to 20 per cent. Whereas, unsecured loans, the share of which was on the rise in the last couple of years in the overall securitisation volumes, could be impacted in the near term because of the RBI’s circular in November 2023.
“Additionally, on-balance sheet liquidity of most entities remains healthy, providing necessary headroom to postpone the execution of securitisation deals to the next quarter. Nevertheless, new players continue to enter the securitisation market, which bodes well for development of a broader market in the future. Icra remains bullish on the securitisation volumes for Q4 FY24 and maintain earlier estimate of annual securitisation volumes worth Rs 1,90,000 crore for FY24 against Rs 1,80,000 crore recorded in FY23,” Dafria added.
