Securitisation volumes witness modest decline; estimated at Rs380 Bn in Q3 FY2024 compared to Rs460 Bn in Q2 FY2024
FinTech BizNews Service
Mumbai, January 5, 2024: According to ICRA’s estimates, the overall securitisation volumes, originated mainly by non-banking financial companies (NBFCs) and housing finance companies (HFCs), stood at Rs38,000 crore in Q3 FY2024, reflecting a sequential de-growth of 17% from Rs46,000 crore recorded in Q2 FY2024. The volumes for Q3 FY2024 also trailed Rs43,000 crore securitised in Q3 FY2023, mainly due to the exit of a large HFC from the securitisation market in the current fiscal. ICRA expects securitisation activity to pick up again and touch Rs. 50,000 crore in Q4 of the current fiscal, which is typically the busiest quarter of the year.
Abhishek Dafria, Senior Vice President and Group Head, Structured Finance Ratings, at ICRA, said: “The securitisation volumes in Q3 FY2024 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. Further, some securitisation deals did not fructify as the originators are expecting reduction in the interest rates in the near term. 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 FY2024 and maintain our earlier estimate of annual securitisation volumes worth Rs. 1,90,000 crore for FY2024 against ~Rs. 1,80,000 crore recorded in FY2023.”
Despite a tepid Q3, the securitisation volumes in 9M FY2024 expanded by 20% to Rs. 1,40,000 crore on a YoY basis on the back of a strong H1. NBFCs and HFCs continue to rely on securitisation as a key funding tool to support their portfolio growth.
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 35-40% share in the overall securitisation volumes, followed by microfinance loans with 22-25% share. Mortgage-backed loans have a share of 18-20%. 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.
