ICRA report
According to ICRA’s estimates, the overall securitisation volumes, primarily originated by financial institutions, amounted to approximately Rs. 45,000 crore in Q1 FY2025. This represents a reduction of around 20% compared to Q1 FY2024, mainly due to the exit of a large housing finance company (HFC) in Q2 FY2024. Excluding this HFC, the securitisation volumes remained largely unchanged year-over-year. Non-banking financial companies (NBFCs) and HFCs continue to use securitisation as a funding tool to raise liquidity, diversify their funding sources, and expand their investor base. ICRA expects securitisation volumes to increase in the subsequent quarters and surpass Rs. 2 trillion for FY2025.
Abhishek Dafria, Senior Vice President and Group Head, Structured Finance Ratings at ICRA, stated: “The securitisation market volumes have not seen a significant increase in Q1 as the overall disbursement growth in the NBFC sector has slowed, especially in the unsecured lending space, following the cautionary advice of the Reserve Bank of India. However, the securitisation market is expanding with new originators, including those from the banking sector, raising funds through this route in the quarter, which is positive 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.”
Pass-through certificates (PTCs) account for approximately 55%-60% of the overall securitisation volumes, with the remaining portion attributed to direct loan sell-downs, i.e., direct assignments. Vehicle loans continue to be the largest asset class in PTC issuances, although leading originators in this space carried out lower securitisation in Q1 FY2025 compared to Q1 FY2024, possibly due to the General Elections, which may have dampened commercial vehicle sales. Microfinance and mortgage-backed loans, however, are largely securitised through direct assignments. The proportion of personal loans has slightly decreased due to recent concerns raised by the RBI, though this asset class remains relatively minor in the overall volumes.
“The performance of the ICRA-rated pools has largely been adequate, with healthy collections, and the credit ratings of the PTCs have been reaffirmed or upgraded for most transactions during the quarter. However, we remain cautious of any potential rise in delinquencies in the unsecured loan segment, given the concerns about overleveraging at the underlying borrower levels. The recent increase in delinquencies in certain geographies for the microfinance sector has not impacted the ICRA-rated pools, thanks to healthy geographical diversification and adequate credit enhancements in the transactions. We expect the credit quality of securitised instruments to remain largely stable during the year, barring any major macroeconomic events,” adds Dafria.
