The overall securitisation volumes, originated mainly by non-banking financial companies (NBFCs) and housing finance companies (HFCs), stood at ~Rs 38,000 crore in Q3FY2024, reflecting a sequential de-growth of ~17 per cent from ~Rs 46,000 crore recorded in Q2FY2024, said a report by ICRA. Further, it said that the volumes for Q3FY2024 also trailed ~Rs 43,000 crore securitised in Q3FY2023, mainly due to the exit of a large HFC from the securitisation market in the current fiscal. Per the estimates by ICRA, securitisation activity is expected 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 Q3FY2024 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 Q4FY2024 and maintains our earlier estimate of annual securitisation volumes worth Rs 1,90,000 crore for FY2024 against ~Rs 1,80,000 crore recorded in FY2023,” Abhishek Dafria added.
The report also stated that the securitisation volumes in 9M FY2024 expanded by 20 per cent to ~Rs 1,40,000 crore on a YoY basis on the back of a strong H1, despite a tepid Q3. 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 issued 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 per cent share in the overall securitisation volumes, followed by microfinance loans with 22-25 per cent share. Mortgage-backed loans have a share of 18-20 per cent. 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.