Indian securitisation market surges in FY2024, nearing record highs amid strong retail credit demand and new entrants

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The Indian securitisation market has experienced significant growth and shifts in fiscal year 2024, reaching nearly ₹1.9 lakh crore, almost matching the all-time high levels of FY2019. This surge, driven by strong retail credit demand, particularly in vehicle loans, and the entry of new originators such as banks, has helped diversify the market.

In FY2024, vehicle loans led the market, accounting for 43% of securitisation volumes, up from 31% in the previous year. Other key sectors such as microfinance (16%), business loans (11%), and personal loans (5%) also grew, driven by robust credit demand. However, the share of mortgage-backed loans declined to 17%, partly due to the exit of HDFC Limited following its merger.

 Mr. Abhishek Dafria, Senior Vice President and Group Head, Structured Finance, ICRA Ltd says:

“Securitisation market witnessed an extraordinary quarter in Q2 FY2025 with volumes touching Rs 60,000 crore as per ICRA’s estimates. About 35% of the volumes originated from private sector banks who have dived into the securitisation market to improve their credit to deposit ratio given the relatively slower pace of deposit accretion. The NBFCs and HFCs also continue to raise funding through securitisation as it diversifies their borrowing liabilities and improves the ALM position. The sustenance of volume growth in the coming quarters though remains to be seen given the appetite for large-size transactions as seen in Q2 may be limited. We believe the market is on track to reach our estimate of ~Rs 2.1 trillion for FY2025.”

The structure of the market has also evolved, with Pass-Through Certificates (PTCs) increasing to 57% of total transactions, as opposed to the traditional dominance of Direct Assignment (DA) deals. This shift is expected to continue into FY2025, with further growth anticipated in the PTC market.

Overall, the securitisation market in India is on a strong upward trajectory, bolstered by increased participation from both non-banking financial companies (NBFCs) and new private sector banks. Going forward, the market is expected to surpass ₹2 lakh crore, with innovations such as co-lending and new asset classes playing pivotal roles.

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