SFBs Securitise Loans Valued At Rs 9,300 Cr To Bolster Liquidity

In FY24, small finance banks (SFBs) increased their loan securitisation to Rs 9,300 crore from around Rs 6,400 crore in FY23, aiming to bolster liquidity amidst fierce competition for resources, as per ICRA data. Abhishek Dafria, Group Head of Structured Finance Ratings at ICRA, noted a significant surge in securitisation by SFBs and a few private sector banks, particularly in light of challenges in deposit growth rates.

During Q3FY2024, SFB-originated loans accounted for over 10 per cent of the total market volumes for the first time, signaling their growing reliance on securitisation for fundraising due to high credit growth and relatively higher deposit costs. Overall, financial institutions' securitisation volumes reached Rs 1.88 trillion in FY24, marking a 4 per cent year-on-year growth despite the departure of leading originator HDFC following its merger with a bank.

In Q4 FY24, securitisation volumes saw a robust 26 per cent quarter-on-quarter growth, reaching Rs 48,000 crore. However, these figures were lower compared to Q4 FY23, when securitisation had reached Rs 63,000 crore. The expansion of the securitisation market reflects heightened demand for retail credit served by finance companies and housing finance companies (HFCs), increased reliance on securitisation as a funding tool by originators and the expansion of the investor base.