Securitisation Volume Surges 56% In Second Quarter

Securitisation volume rose 56 per cent on-year to Rs 70,000 crore in the second quarter of this fiscal, propelled by large issuances by some key players, especially a large private sector bank, and a few NBFCs that are primarily into vehicle financing.

The performance helped securitisation volume surpass Rs 1.15 lakh crore for the first half of the fiscal, clocking a 15 per cent on-year growth.

Crisil Ratings also observed participation from a wider base of 130 originators in the first half compared with 165 for the whole of last fiscal and renewed interest from investors such as mutual funds.

Aparna Kirubakaran, Director, Crisil Ratings, “Strong market volume observed in the first half was fueled by large originations by a big private sector bank and a few vehicle financiers. Securitisation remains an efficient alternate source of fundraising as banks continue to tackle high credit-deposit ratio."

Kirubakaran added that the strong retail credit growth of non-banks (accounting for over two-thirds of securitisation originations), particularly those in vehicle financing, also continues to support their large-scale originations in the market. Besides, market conditions have been favourable, with softening yields.

The share of vehicle loans (including commercial vehicles and two-wheelers) in securitisation volume has increased to 45 per cent in the first half and continues to be the largest asset class. Mortgage-backed securitisation loans have also seen strong growth of 23 per cent and regained around 10 per cent share in the first half of fiscal 2025 compared with last fiscal.

There was no change in the share of other asset classes, comprising personal (7 per cent) and business loans (9 per cent). However, the share of microfinance loans fell to 10% in the first half compared with 16 per cent last fiscal as originators exercised caution in new disbursements and overall growth due to early signs of asset quality challenges. 

Microfinance securitisation volume may moderate in the third quarter as investors are likely to wait for stability in collection performance. Gold loan securitisation volume remained muted as the regulatory embargo was lifted only towards the end of the second quarter.

After having outstripped the direct assignment (DA) transactions volume for the first time in fiscal 2024, pass-through certificates (PTCs) continue to enjoy a majority share, constituting 52 per cent of overall securitisation volume in the first half of this fiscal.

As for the investor base, banks continued to dominate the market, accounting for over 70 per cent of the securitisation volume in the first half. Capital market investors such as mutual funds have been on the lookout for opportunistic investments in the securitisation market for a long time now and have invested sizeable volumes in the second quarter, concentrated on a few originators.

“Overall, we expect banks and NBFCs to continue to tap the securitisation route to meet their funding diversification needs. The securitisation market remains on course to hit all-time highs this fiscal,” said Crisil Ratings.